March 20, 2026: You Might Be Missing Opportunities in a Down Market
People think they can only make money when the market is up. Not necessarily true. Not only are there ways to make money, but down markets are a great opportunity to set yourself up for the future.
Tax-loss harvesting has to be at the top of the list. Tax-loss harvesting is selling your investments at a loss then repurchasing the original investments at a later date. Why would you realize losses on purpose?
Realizing losses turns “paper” losses into actual losses. The tax code allows you to use these losses at any date in the future to net against capital gains. Up to $3,000 of capital losses can be used as a deduction against income per year - no itemizing necessary. Finally, any unused losses (after netting against capital gains and claiming the $3,000 deduction) get carried forward indefinitely to be used in future years. This is an incredibly valuable strategy if done correctly.
Be careful. There are strict rules about wash-sale rules, buying substantially identical securities, buying back the original security too soon, or holding cash during the waiting period that could seriously limit the harvested losses or your long-term returns. This strategy should be done with extreme care.
Portfolio rebalancing may be needed. When the market is volatile, it may be time to rebalance. If your target allocation is 60% stocks and 40% bonds, but the recent volatility has made that split closer to 50/50 then it is probably time to review rebalancing as a strategy.
Be careful with rebalancing as well. If this is done in a taxable account, then capital gains (or losses) will be triggered. Rebalancing too much can increase your transaction and tax costs while rebalancing too infrequently can cause your overall allocation to drift significantly outside your risk tolerance
If you are terrified of the current volatility and what it’s doing to your portfolio, you need to review your overall allocation. Being nervous about markets isn’t uncommon, but when it’s causing you to lose sleep, lack focus, ignore your portfolio out of fear, or constantly worry about it then it’s time for a review. There is no such thing as a risk-free investment so ups and downs will occur. But, there may be a better solution for you if your current portfolio is causing you nothing but stress. Getting your allocation correct now can prevent you from making serious mistakes, like selling when the market drops or avoiding investing at all-time highs, in the future.