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Just because stocks are falling doesn’t mean all is necessarily lost. Sophisticated investors know how to use a bear market to increase their portfolio.
Listen to the podcast to learn three ways to profit from a falling market.
1. Pretend to be a farmer and harvest! Harvesting tax losses means selling stocks at a loss and matching that loss against capital gains to minimize capital gains taxes. Nobody likes paying taxes, and nobody likes stocks losing value, but reaping the tax losses manages to soften the negative blow of two potentially unpleasant situations. While savvy investors often use year-end tax loss harvesting, you can implement this strategy at any time.
2. Profit from selling stocks. What does it mean when the market is oversold? Simply put, this means that prices have fallen more than they probably should have. When markets go up, investors who want to lock in their profits sell their stocks. If too many investors sell at the same time, the market falls; it is oversold. Turn this to your advantage and talk to a licensed financial advisor about purchasing additional shares at a lower price.
3. Keep a large cash reserve. Some investors want every penny of their savings invested, thinking that means their money is working the hardest. However, if you don’t have cash available to buy a bargain (see point above), you stand to lose when a buying opportunity presents itself. Note that a large cash reserve for investment is not an emergency fund.
No need to worry about a bear market, there are strategies you can use to your advantage.
The Goldstein On Gelt Show is a financial podcast. Click on the player below to listen. For show notes and resources mentioned in the show, go to https://goldsteinongelt.com/radio-show