I’m feeling like a broken record, but the market set another all-time high next week. Earnings season is wrapping up with strong performance. Concerns about the delta variant were short-lived. It appears investors are poised to buy into the market on each dip, continuing to drive stocks higher.
We often use “dip”, “pullback” and “correction” interchangeably, but there are some actual definitions for these. A pullback is drop of at least 5%, and a correction is a drop of at least 10%. Going back to 1950, we typically average three pullbacks a year, and one correction a year. We haven’t had a pullback since last October, and the last correct was March of 2020.
When we do see this pullback or correction, you have some great options to take advantage of it. If you have extra cash, a market drop is a good time to buy. If you have an IRA or 401(k) that allows in-plan conversions, talk with your CPA about using the drop to convert part of your account to a Roth IRA or 401(k). You’ll have to pay taxes on whatever you convert, so make sure you think through that carefully. And if you’re not able to invest more or convert anything, the best thing to do in a downturn is to stay the course. Keep investing in your 401(k) or other employer-sponsored plan and leave your investments alone.
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All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, consult with your attorney, accountant, and financial advisor or tax advisor prior to investing.