Investment Advisory Firm
INDIANAPOLIS, July 20, 2020 /PRNewswire/ -- Sheaff Brock principal Dave Gilreath and wealth manager Tiffany VanHook assert that, while COVID-19 has caused financial hardship to many investors, it may have created new opportunities for investors to reduce risk, preserve assets, and position for future market gains. They suggest that all types of investors can improve their financial situation now using these tactics.
Investment Tactic #1
If either COVID-19 caused a 2020 income reduction but you expect to earn more in 2021, or your IRA asset value dropped but should recover, consider converting your IRA into a Roth. (The conversion will trigger ordinary income tax for 2020; prepare to use cash from outside the IRA to pay that tax.)
Investment Tactic #2
With rates at historic lows, the commensurate interest rate risk is at a peak. Gilreath notes that reducing bond exposure might be beneficial, perhaps using preferred stock as an alternative fixed-income asset. With preferreds historically less sensitive to interest rate moves than bonds, investors could face less of a threat to principal when rates turn upwards.
Investment Tactic #3
A shift from growth stocks to value stocks may help, the advisors suggest, noting that in the 30-day period ending June 10, the S&P Value Index outperformed the S&P Growth Index by 2.5.
Investment Tactic #4
More "extreme" survivalists may choose to borrow money to buy reliable dividend-paying stocks, paying loan interest, then pocketing net gains. Admitting "this isn't a perennially viable strategy," Gilreath and VanHook note that the current wide spread between price/dividend ratios and the interest rate on loans may make it worth considering.
Estate Planning Tactic
Ultra-wealthy individuals concerned about estate tax might find this an ideal time to set up a grantor retained annuity trust. Current low interest rates combined with the market decline may create an ideal environment for this type of estate planning—and strategies to pass wealth to trust beneficiaries.
About Sheaff Brock:
Sheaff Brock is an SEC-registered, fee-only independent investment firm striving to enhance portfolios of growth- and income-oriented investors, managing $900.4 million in assets nationwide as of 6/30/2020. Sheaff Brock principal David Gilreath contributes investment news to CNBC.com, Seeking Alpha, and WealthManagement.com. Visit Sheaff Brock YouTube for information.
Sheaff Brock Investment Advisors, LLC ("SBIA") is an SEC-registered investment advisor founded in 2001. Clients or prospective clients are directed to SBIA's Form ADV Part 2A prior to deciding to participate in any portfolio or making any investment decision. The views and opinions in the preceding commentary are subject to change without notice and are as of the date of the report. There is no guarantee that any market forecast set forth in the commentary will be realized. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice, and is not intended to predict or depict performance of any investment.
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SOURCE Sheaff Brock Investment Advisors