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In this week’s episode of Green Cards to Greenbacks we talk about 3 main topics on how you can be one step ahead of the fall of the stock market. The first one, we’re going to be talking about is getting rid of the investments that you don’t want. Second, how you can convert some of your money from a traditional retirement account to a rough retirement account. And last, how to look at this particular environment as an opportunity.

Mental Hack

There’s a mental hack that you can use and that is to ask yourself, How do you feel about gifting your wealth to someone else? Because that’s exactly what you’re gonna do if you sell your investments during a down market. Someone else is gonna buy those investments for you.

Use that mental hack. I think it’s extremely helpful for you. 

1st topic: Getting rid of the investments that you don’t want

The first topic I wanted to talk about during this down market is to finally get rid of an investment that you otherwise couldn’t before because of the tax consequences. Because in taxable accounts that are not a part of a retirement account, every time you buy or you sell something, it triggers a tax consequence.

Don’t get stuck holding an investment that has grown tremendously, whether it be because it grew due to performance, or it grew because their company gave them stock as part of their compensation, and they know that they wanna get rid of it.

Now that the market’s down 20% and some individual companies are down, even more than that, it’s appropriate for you to look at your portfolio and say, Hey, I think I might have the opportunity now to sell some of those investments without triggering such crazy taxes and really diversify my money in a better way. 

2nd tip – converting some of your money from a traditional retirement account to a rough retirement account.

The second tip is also related to taxes. Hear me out: there’s a lot of opportunity during the down market, and this has to do with converting some of your money from a traditional retirement account to a Roth IRA retirement account.

To clarify, a traditional retirement account and a Roth retirement account are just account types. They’re not investments.

A Roth account is where you pay the taxes now, so you don’t get that deduction on your taxes during the year.

You made that contribution. But then the money grows tax-free and it’s tax-deferred, you never have to pay taxes on the growth. Now how can we take advantage of that? Why is making a Roth conversion important? and what is a Roth conversion? Well, a Roth conversion is basically you taking money out of your traditional account and moving it over into a Roth IRA.

For every dollar that you convert to a Roth IRA, you’re more likely converting a dollar 20 or a dollar 25 and basically getting a discount.

But because it markets down, you know, you, you essentially are getting a 20, 25% discount on your taxes. So it really allows you to lock in and convert more money to the Roth account, and save money on taxes.

Why is this important? Let’s say for example have a $100.000 traditional IRA and a $100.000 Roth IRA. I wanna ask you one question, Which account is worth more? traditional or Roth?

3rd tip: Looking at this particular environment as. An opportunity.

So the third hack is really looking at this particular environment as an opportunity.

There’s this war happening between Russia and Ukraine that we don’t know how it will impact our economy. And look, I’m here to tell you that if you invested appropriately, if you have an investment strategy, not an observation strategy, but an investment strategy, you’re going to be okay.

Your portfolio will return to where it was, if not, it will continue to rise because that’s what the stock market has done. Typically a recession will last about 18 months on average. So buying investments in this environment actually makes sense.

Right now you’re getting a 20% discount. Buy some stocks that it’s an opportunity to rebalance your portfolio. 

Wrap Up

  • We talked about how to actually harvest losses in a taxable account, and how to diversify your investments in a taxable account. 
  • About the differences between a traditional retirement account and a Roth retirement account. 
  • About which one is worth more if they each have the same amount of money.
  • About how to take advantage of that by doing some Roth conversions.
  • About having a mindset. 
  • About where the market is and, if you invested appropriately, viewing this as an opportunity to actually buy more shares of any good investment that will ultimately appreciate increasing your wealth. 

I hope this has been helpful. Thank you so much for listening.