It seems like every newspaper article, news release, and social media post over the past weeks has been related to the spread of COVID-19, the coronavirus that is now making its way through the US and other countries of the world.  The coronavirus has brought the stock market down at an historic rate, from a near record-high level of the Dow Jones Industrial Average of 29,348 on February 19, 2020, to a level of 20,087 only one month later on March 19, 2020.  The stock market hovers around a 30% loss from its high as of the time of this writing.  This market decline, compounded with fears of possibly contracting or spreading the virus, and the lack of ability to obtain some daily necessities makes it easy to get caught up in panic and worry.  However, I believe that there is a silver lining to every bad situation.  This situation is no different and presents some rare opportunities to consider during these trying times.  These opportunities may be few in a lifetime, so it is worth pausing, taking a deep breath, and thinking about how you can utilize this time as an opportunity rather than a hindrance.  With that in mind, I have 6 ideas to consider during this unique time:

Review Your Financial Plan:

Consider reviewing and updating your financial plan, including your current goals, assets, and savings.  You may be surprised at how little your plans for the future may have changed if you already had a solid financial plan before. Even if you do have to save more, or work longer, or spend less to achieve your goals, having the knowledge of what you need to do can be a reassurance during these uncertain times.  If you have never completed a financial plan, hiring a Certified Financial Planner® professional to help you can be the first step toward financial security and stability.

Do a Roth Conversion:

As I mentioned above, the coronavirus has caused markets to drop, and many accounts have suffered losses.  This may have set your traditional IRA balance back several years.  However, you might be able to transform that loss into hope by completing a Roth conversion of all or a portion of your IRA and paying tax now on the relatively low IRA balance.  All funds that come out of a traditional IRA are generally taxed at your ordinary income rates.  However, contributions, conversions, and earnings in a Roth IRA are generally tax-free if you take them out after age 59 ½.  So consider moving your funds from the “forever taxed” account in your IRA to the “never taxed” account in a Roth IRA.  Convert and pay tax now when values are low, and get tax-free earnings in the future when the market recovers!

Refinance, refinance, refinance!: 

You may have seen a headline that said the Federal Reserve was dropping interest rates to zero percent.  What happened is that the Fed funds rate, the rate that banks use for short-term lending, was reduced to a target range of 0 to 0.25 percent.  While this does not mean you can go borrow money for free now, it does mean that mortgage interest rates are probably the lowest they have been in history.  If you have a mortgage from prior years, you may consider refinancing now to significantly reduce the interest that you will pay over the life of your loan.  A small change in interest rates can easily save 10s of thousands of dollars in interest over the life of your loan.  You may even be able to reduce your monthly payment, or reduce the term of your loan at the same time!

Time to Buy?:

When you go to the store to buy something, do you get excited when you have to pay full price? Of course not! We all love a good sale.  That’s why Black Friday has become such a cultural phenomenon, bringing out droves of people hoping to take advantage of discount prices.  The stock market as of the time I am writing this is on sale by over 30%, and that is something that doesn’t happen anywhere near as often as a department store sale.  If you have funds to invest, or that IRA contribution to make, consider doing it now.  While no one knows when the market will hit the bottom, we know the market is relatively cheap now, so consider it an opportunity to buy at relatively low prices.

Harvest Tax Losses:

You may have investments now that have a loss in a taxable account that you can sell to claim a capital loss for tax purposes.  If you have these capital losses, it can be a great time to “bank” these losses for use against future capital gains, reducing future potential tax bills.  You can also write off up to $3,000 per year of tax losses against your ordinary income, and carry the balance forward to future years.  Be careful, however, because if you buy back into the same position before 30 days after the sale, you have what is called a wash sale that disallows the loss.  You can, however, buy a similar investment for the 30-day wash sale period, and then transition back to your original investment if you desire after the 30 days are up.

Rebalance your portfolio:

If you have an investment portfolio, your current balance of stocks has likely decreased relative to your bonds.  Now is a time to look at rebalancing to your target allocation.  The resulting action would be to sell bonds and buy stocks, adhering to the all-important, “buy low, sell high” adage.  This can be difficult to swallow during financial turmoil, but is nevertheless a time-tested discipline that has seen us through many past market downturns. While we don’t know how many this pandemic will infect, how low the market will go, or when things will return to normal, we can look at history as a guide during these times.  History doesn’t repeat itself, but it rhymes – from Spanish flu in 1918 killing millions, to the Polio outbreak in 1952, affecting 58,000, to Measles, which has affected millions, and SARS and MERS more recently. We have prevailed through many epidemics and pandemics in the past, and we will make it through this one together as well, with lessons to learn that make us stronger for it. Published in the Victoria Advocate David Faskas is a CFA and CFP® Professional with KMH Wealth Management, LLC. He has been with the firm for over eight years and specializes in investments and portfolio management.  He is the Chief Investment Officer, Chief Financial Planning Officer, and a managing partner in the firm.