The theme this week on the Retirement Quick Tips Podcast is: Don’t Just Sit There. Do Something! If you can do something proactive other than just sitting on your hands and hoping that the markets turn around soon, you’ll be better able to get through this difficult time while keeping your long term investment strategy intact. 

One of the nice things about a stock market downturn and a recession is that it flushes out the excesses that happened during the boom times. Weeding out the bad companies is essential for the continued long-term growth and health of the economy. During the boom times, good opportunities become more scarce, so money starts flowing to the more speculative and lower quality businesses and investments. There’s so much capital flowing around and so few truly good opportunities, that investors start believing that they’ll make money anywhere and everywhere, and lower quality business, real estate investments, ets. are able to secure funding. 

When these low quality businesses no longer can ride the coattails of a strong economy and easy money environment, most go bankrupt, and the companies that were stronger are the ones that survive. It’s survival of the fittest in the business world, and again it’s an essential part of maintaining a strong economy over the long-term.

But what do you do when you own some of these bad businesses? Maybe you bought some meme stocks, some speculative crypto plays, or a speculative biotech stock that’s down 50% or more from where you bought it? 

Is this a good quality business that got dragged down with the rest of the portfolio, or an investment that’s unlikely to return to it’s former glory? If it’s the latter, then the smart thing to do is get out, don’t wait, cut your losses, and re-position your portfolio to grow again once the markets recover with better quality investments. 

When you own one of these dogs, it’s important to recognize the difference between an investment that’s been dragged down by the overall market, and investment that’s terrible  in and of itself and needs to go. The trick is to tell the difference between the two, and get rid of your investments that have little chance of ever recovering.

If you invested in a taxable account, then you can benefit from the loss since you can use the loss to lower your taxes, and even carry it forward to future years. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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