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Welcome to Make your Money Matter, the show that aims to change the way we think about financial advice. So, you can make better decisions.

Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1500 clients nationwide. With over $2.5 billion in assets, they’re a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now here's your host Brad Barrett. [00:26.1]

Brad: Welcome to Make your Money Matter, the show dedicated to helping you create a better relationship with your money. I'm your host, Brad Barrett, and it's my goal to help you distill the best ideas when it comes to your finances so you can make more confident money moves. Here at One Capital Management, our mission is simple to help our clients and you listeners take control of your finances and build the life you deserve. Friends, today the challenge is no longer the access to information, but rather it's finding the right information, and more importantly, how that information applies to you. And that's my commitment to you here today on the Make your Money Matter podcast, because after all your money matters and knowing how to plan your financial future is vital to your financial success. [01:13.0]

Before we get started on this week's episode, if want to find out more about myself or any one of our advisors here at One Capital Management, you can go to our website at onecapitalmanagement.com or give us a call. You can call us at (805) 410-5454 or text us. Text the word TRACK right now. T R A C K to that same number (805) 410-5454 and we’ll reach to you to set that time to go through what we call our retirement track review. It’s complimentary, it’s for you. For each of you listening right now, who haven't sought out that counsel, that advisor who wants more information on investing and planning and what it means for your wealth forecasting. And in fact, that leads right into today's episode, specifically around markets. As we know, when it comes to investing in the principles that are in building a well-structured and diversified portfolio, but one of the things that I've spoken about heavily within our client base here at One Capital Management, as many of my colleagues here have as well. And we've talked about numerous times here on the Make your Money Matter podcast, but it's also about the emotional side of things when it comes to investing and more in particular when markets move and specifically when markets move down. [02:31.2]

Look, I think it goes without saying that if markets always moved up, you wouldn't have any need to be listening to this podcast or researching or reading or listening to anyone else around market theories or portfolio management theories, right? Because everything is moving upwards, but that is not always the case, as we know. And I think in this time period right now, with everything going on with inflation supply chain issues, all of which we've talked about on this show, it's a great time to be talking about volatility and variability and what we need to make sure we keep in check as we see some of that volatility and variability. Even some of the best investors, can't always predict market downturns. I mean, more than ever before we have these predictions coming out left and right by forecasters here and there markets move. And the thing that I'm trying to say today on this show around how we take that in emotionally, sometimes is really important to check that with our planning, with our logic, around how we are managing the portfolio. And here's what I mean by that. [03:40.1]

There is an old saying that I learned in economic studies that we will always remember, human beings will always remember the $1 loss more than the $10 gain. It's psychological. We'd like to dwell on the bad, the whole misery is company thing. And the idea I want to bring today is let's not dwell on that, especially when it comes to your portfolio. So, let's talk about the five moves to make when markets go down. So instead of curdling in the fetal position, in the corner of a room, scared of the markets, let's have a plan in place to attack the market when certain things happen. And remember market downturns don't mean you should just get out of the stock market as fast as you can. In fact, on the contrary downturns in markets volatility or variability in markets and dare, I even say, bear markets are an excellent opportunity to flex, let's call it specific financial muscles. Younger investors listening could actually benefit from increasing investments during market downturns, as the added capital could improve long-term prospects. This is dollar cost averaging. [04:53.1]

Now there's other financial moves to consider including rebalancing your portfolio, converting funds to maybe a Roth IRA, and maybe even conducting tax loss harvesting on taxable accounts, all of which we're going to go through. And even though we have volatility and variability, we can't predict these market downturns as I mentioned. No one can. And if you have significant invested assets right now, as you're listening to this, you've invested for maybe 20 or 30 years, you got a good 401k balance, good IRA balances market declines can jeopardize hard-earned wealth and that's a scary thought I'm with you. But while the stock market usually rebounds in times, market downturns are especially scary while you're going through it. So, one of the best ways I've known in nearly 20 years of being a financial advisor and investment manager, it's the not only how the planning, which many of you hear me say each and every week, but have specific moves that you and your advisor should be looking at and can be looking at during volatile times. So, let's talk about this. [05:59.9]

And again, for example, where we're at right now, markets have been on a record-setting run lately. It's not lost on me, but that won't go on forever. So, it's good to be prepared with game plan to prosper in maybe some lighter times in the market. I'm not going to say bad times because I can't predict that, but I will say that we'll have some volatility and variability. So, what are some of the things we want to look at when it comes to those volatile times? Number one, I mentioned this earlier. It doesn't have to be for younger individuals only, but increase your contributions. Now, while it may seem counterintuitive to some, to increase your retirement savings when the market is down, it can be a worthwhile strategy, especially, and I mentioned before for younger investors, but for anyone. By buying, when the market is down, investors can take advantage of stock market rebounds in the future. Basically, boosting contributions puts more oxygen in your fire of your portfolio. It pumps a portfolio with fresh capital. And if you, do it on a consistent basis, dollar cost averaging is a great strategy. It's one of the best strategies, why I lead off with it. Number one, here, this isn't in necessarily any order, but I do lead off with this one because it's the best way to stave through any volatility or vulnerability you'll see in the market. [07:19.7]

Number two, rebalance your portfolio. Now this doesn't have to happen right away, but it's a good discussion to have with your advisor. Market downturns are good times to look at a rebalance. Now, if you're nearing retirement, you may want to transfer some of your assets to risk adverse investments, such as bonds and CDs, but be mindful there, especially in inflationary time periods like we're seeing right now. And you've heard me say this before, but the old adage of moving to more conservative approach in retirement is a rule of thumb, but not the rule itself. It really needs to be sussed out with your overall planning, your risk tolerance and really what your distribution rate in retirement shows that you need. Because moving from equities, let's say to bonds or CDs, just because you're now 60 or 65, because you've been told that your entire life doesn't mean it's the right strategy for you. So, seek that counsel to go through that, to make sure it's right for you. [08:13.8]

Now, on the other hand, younger investors might want to take advantage of the downturn by investing maybe more heavily in the stock market cause they have more time to pick up. It's always a good idea to have a balanced portfolio, again, with a mix of assets, to diversify your investments and really ultimately manage your risk. But rebalancing your portfolio is an interesting strategy to take maybe moving up on the equity or down, depending on your plan and depending your risk tolerance. [08:40.6]

Number three, I mentioned this earlier as Roth conversions. Now this may not be top of the list, but I want to bring it up of the five I want to bring up here and regarding some strategies to use when markets are being volatile. Roth IRA conversions are a great way to transfer money from a traditional taxable IRA to a tax-free Roth IRA. However, remember when you complete this conversion under normal market conditions, you're typically on the hook for a significant amount of taxes on your investments. You can save money on a Roth conversion by completing it during a down market or a market downturn, because the value of your investments is lower during a decline in the market, you'll pay a smaller amount of taxes when you make the conversion. It's also a good strategy if your income is depending on your retirement plan rules, you may be able to complete the same strategy inside of your qualified plan as well. Not for all but something to look at for your employer. So again, a Roth conversion is something you should bring up with your advisor. It's something that say, Hey, we're taking kind of a haircut here in the portfolio. We were talking about Roth conversions before is now a good strategy. [09:48.4]

I think dollar cost averaging basically increasing your contributions, looking at rebalances, either increasing your equity or decreasing it depending on your planning come first. But Roth conversion has a lot to do with not necessarily what's you're owning, but how you're owning it. Something I've said many times before on the show, because we're talking a lot about what we're owning the portfolio mix inside the portfolio, but how we own it is as important. That leads me into number four, tax loss, harvesting. [10:18.7]

So other than an IRA, anything inside of a tax deferred shell, tax loss harvesting is really for those taxable accounts, your trust accounts, your individual accounts. It's the process of selling investments at a loss to write them off on your taxes. If you're interested in reducing your tax burden for the year, capital loss, harvesting is a strategy worth considering. So, tax loss harvesting only works with investments when you experienced a loss. So, while you can buy back investments after selling them, we do have to wait at least 31 days to avoid violating a wash sale rule, so any good advisor will know how to do that. But if you have gains in your portfolio and you have a taxable issue for that year tax loss, harvesting degree strategy, any advisor you're working with right now should be doing that for assets, you have that you can tax loss harvest. By the way, this is a great example of why I preach so heavily on planning and investing and how they need to go hand in hand. If you have a brokerage account and you're just investing, investing, investing, but no real coordination with your overall plan, both from a yearly tax perspective or an overall retirement perspective. And again, retirement isn't necessarily your 55, 60, 65. Retirement just means financially free to when you want that to happen. [11:37.6]

So, point I'm trying to make here is your investment planning should go in line with your overall financial planning. And this is a great example. If we didn't know, as an advisor here at One Capital Management for our clients, if we didn't know what their overall tax planning situation was on a yearly basis, we wouldn't be a very good manager to them on the tax loss harvesting side here, which is something we do heavily for all of our clients with after tax accounts. So, if you haven't looked at that, it's a strategy worth looking at when it comes to market variability or volatility, or maybe even downturns in markets. [12:13.2]

All right, number five, fifth and final one, again, not necessarily in any priority order, but I did lead off with dollar cost averaging or increasing your contributions because I do think that's kind of number one on my list in particular, but number five is gifting. Now, suppose you plan on gifting assets to a friend or family members. In that case, you may want to consider giving during a market downturn when assets have lower values, cause if you believe that property will appreciate in the future, it's just down right now. You can gift it at a lower value. Strategically planning, your giving allows you to shift more property at lower values to loved ones like children or grandchildren and let the value grow for them. [12:56.7]

Again, each of these five I'm mentioning has a lot to do more so than most of the topics I'd bring up with your specific planning. So those are the five things I think that are interesting. When we talk about market downturns, this isn't to say we're going to see market downturns, but with all the conversation about volatility being at all-time highs, we're hearing it constantly it's important to remind ourselves that just because we see volatile times, or we just, because we see some tumultuousness in the markets, it doesn't mean we hide away in the corner and wait until it's over or just cash out. These are five strategies and there's more. The five strategies to consider when we see Marcus do that. Number one, increasing your contributions. Number two, potentially rebalancing your portfolio. Number three, taking a look at Roth conversions as an idea, if you've already been discussing that with your advisor. Number four, for those taxable accounts, there's tax loss, harvesting to consider, and number five is gifting. So, all of those are really great strategies that have to do with your portfolio and have to do with market volatility or again, market variability as it comes to downturns in the markets. [14:07.9]

And we hear some times from clients, especially in particular, not just clients, but prospective clients who call in through our radio show through the podcast here, that investing is, is too risky. I don't trust it. I don't understand it. And I think it's really important to say this is that we as human beings, don't like what we don't understand. I think we all can agree with that. And I think the market has a lot to do with that. We don't truly understand it sometimes. So, my best advice is find an experienced advisor who can help you walk through their knowledge about what the market is and how we appropriately plan through our investing strategies, that is paramount. And if you think about it differently, if you think the comment of investing is far too risky, what if I lose all my money or those kinds of things, when it comes to variability or volatility, I mean, you can invest in the S&P 500, which has 500 plus companies like apple, Amazon, etc. If those all go to zero as a crazy worst-case scenario, if those all go to zero, it means all of these companies would have essentially gone bankrupt and we'd have much bigger problems. We don't have a stock market problem. We have a American problem, or dare I say, a global worldwide problem. [15:22.7]

Not investing sometimes is the real risk, but when it comes to investing diversification, which I know is an overused word a lot of times, but it means so much. It is so important. And there are definitely sectors to be involved with during cyclical market movements. Utilities, healthcare, consumer staples, telecommunications are all great sectors to have during more volatile times in the markets. So, make sure you have those looked at in your portfolio because seeking counsel with an experienced investment manager and advisor will help protect the assets during volatile times so that we're not just investing to invest. We're investing for purpose, purposeful investing based on your planning, your goals and your objectives matter when it comes to making the money that you want to see the return on investment you want to see for your overall plan. [16:17.4]

I want to thank you for listening to the, Make your Money Matter. Before acting upon anything discussed today, remember speak with a financial advisor near you about your specific situation or if you'd like our help, you can visit us again at onecapitalmanagement.com or give us a call (805) 410-5454 or text us. Text the word TRACK, T R A C K to that same number (805) 410-5454 and we’ll reach to you to set that time to go through complimentary retirement track review meeting. And always remember make your money matter. [16:51.7]

The information in this podcast is educational and general in nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.

To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [17:15.2]