I don’t know where the bottom is but I’m 100% certain that stocks are a much better buy today than they were on Feb. 19. Rebalancing during the dot-com and real estate financial bubbles worked out pretty well. Buying stocks on sale usually works in the long-run and you may need to do it several times since we don’t know when the bottom will come.
2. Tax-loss harvest
By selling losses, you can build up a tax-loss carryforward for use in future years, not to mention the $3,000 that couples can recognize each year. Bad times don’t last forever and markets will move up again. That tax-loss carryforward you build now will be very valuable when you have to sell stocks at gains later on. If stocks/funds haven’t recovered in the 31-day waiting period to avoid a wash sale, you can then go back into that original stocks/funds.
3. Get rid of the dogs
Dogs in the portfolio, of course. That could be a fund that is expensive and/or passing through some capital gains. And, by the way, those funds may pass though gains even in a bear market like this, potentially sharpening investment pain. In addition, dogs could be individual stocks provide uncompensated risk. But if the gains evaporate or become smaller, minimal taxes would need to be paid. Even if there are still gains in these dogs, the tax-loss harvesting previously mentioned may provide losses to offset these gains.
4. Reframe what the stock market is
Vanguard founder Jack Bogle famously said, “Investing is about enjoying the returns earned by businesses. And the stock market is nothing but a giant distraction in that quest to acquire returns that business earns.” Are you buying a stock because you believe the company's business or due to other reasons?