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Stock Market Volatility Brings Opportunities

by Financial Design Studio, Inc. / June 11, 2020

Fee Only Financial Advisor Deer Park Stock Market Volatility Brings Opportunities

Do you feel like you’ve missed out? One thing that has stood out during recent market volatility is the speed with which the market initially corrected from it’s near-term bottom, in late March. Not only has the market corrected quickly, but the size of the movements, both up and down have been drastic too. The early 2020 stock market volatility has brought with it some opportunities.

If we look back at history we can see that sometimes it takes years to see these size moves in the market. Here is a helpful chart which shows that, on average, bear markets recoup their losses in a 3-year period. That is significantly longer than the 3-month correction we’ve just seen; or is it too early to say the recovery is complete?

fee only financial advisor bear market recoup quickly

We have been very hesitant to jump on board believing the recovery is complete. You can read in our recent blog posts, It’s Official…We are in a recession and Are Negative Rates Coming to the US?, to get an idea of the reasons why.

Do we just stand by and watch the market fluctuate, waiting for recovery?

It may seem tough to find something good about the market dropping. But our team can tell you of the countless opportunities created with market fluctuation like this. Now, I don’t say that flippantly as if I enjoy the drastic market moves. Just like you, I prefer when we have steady economic and market growth. And here’s a list of ways to prove that you haven’t been a bystander, but rather that you’ve used these opportunities to help reach your financial goals:

Opportunity 1: Tax Neutral Portfolio Rebalancing

When the market dropped you were able to sell out of investments you didn’t want to hold with little to no gains, then buy the positions you did want to hold.  Now you can stay invested during this time with a portfolio you are more comfortable with.

Opportunity 2: Roth Conversions

For this strategy, a market drop allows you to convert more shares of a position into your Roth IRA, from an IRA. Then when the market recovers that larger number of shares is growing tax-free in your Roth IRA.

Opportunity 3: Mortgage Refinancing

Through the market fluctuation we’ve written about how the market and the economy are tied together. With a drop in interest rates you’ve been able to refinance your mortgage to a lower interest rate, saving you money in interest.

Opportunity 4: Dollar-cost averaging new money into investments

Perhaps you have been affected very little by changes in employment or income and you’ve continued with your regular investment into your retirement accounts. You’ve benefited from adding new funds into investments at lower prices.

If you look through this list and see opportunities you have considered or haven’t yet benefited from; it is not too late. Remember, we discussed earlier that market recoveries take time? For some of you the opportunity for the items above are just ahead. Because as I write this, the market is experiencing its worst one-day drop since March. Don’t be afraid; but look for the opportunities and get help when you need it. 

Wondering how this affects your future finances? Schedule a call with Financial Design Studio, financial advisors in Deer Park, to discuss your portfolio today.

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fee only financial advisor market fluctuates volatility creates opportunity

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Financial Design Studio, Inc.

We are financial advisors in Deer Park and Barrington, IL. A team with a passion for helping others design a path to financial success — whatever success means for you. Each of our unique insights fit together to create broad expertise, complete roadmaps, and creative solutions. We have seen the power of having a financial plan, and adjusting that plan to life. The result? Freedom from worrying about the future so you can enjoy today.