Five Ways to Take Advantage of a Down Market According to Yieldstreet
Down Market Advantages
As concerns over rising interest rates, inflation, and the possibility of a recession continue to make headlines, being prepared for a potential market downturn is crucial. To assist investors in navigating challenging times, the financial experts at Yieldstreet have compiled a comprehensive list of five strategies to take advantage of a down market.
Harvest Tax Losses: While it may seem counterintuitive, strategically selling underperforming investments at a loss can offer significant advantages. By offsetting capital gains tax liability and potentially reducing ordinary income taxes, investors can rid their portfolios of underperforming positions and diversify their holdings.
Execute a Roth Conversion: During a market downturn when the value of a portfolio is depressed, shifting funds from a tax-deferred IRA to a post-tax Roth IRA can lead to a lower withdrawal tax burden. As the market eventually recovers, the converted assets may recoup losses and generate tax-free gains, potentially offsetting the initial tax implications of the conversion.
Buy Dividend-Paying Stocks: Renowned investor Warren Buffett once advised, "Be fearful when others are greedy, and greedy when others are fearful." When stock prices decline due to widespread selling, it can be an opportune time to acquire dividend-paying stocks at discounted prices. Companies with a history of uninterrupted dividends can present excellent value during a bear market, potentially delivering higher yields over the long term and acting as a buffer against volatility.
Invest in Real Estate: Real estate investments, particularly rental properties, offer the potential for consistent income irrespective of stock market performance. They serve as a valuable hedge against market volatility. For those looking for a more accessible entry point, investing in real estate investment trusts (REITs) provides the opportunity to participate in real estate gains without the responsibilities of property management. REITs can offer a lower cost of entry, potential high dividends, and diversification benefits.
Stand Pat: Despite the challenges and uncertainty that a down market presents, historical data shows that markets have always rebounded from downturns. Selling during a market decline to preserve capital and then attempting to re-enter the market at the right time can be riskier than patiently waiting for the recovery. Time "in" the market has consistently proven to be more lucrative than trying to "time" the market. Thus, maintaining a long-term perspective and staying invested may be a prudent approach during a declining market.
To learn more about maximizing investment opportunities, visit www.yieldstreet.com.
Source: Yieldstreet via Newswire