Hey guys, Coach Julien here. In this video, I’m going to talk to you about what you can do if your portfolio is in the red. So stay tuned.
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Hi, I’m Julien Regoli, CPA, and my channel is about money matters: how to save, how to invest, and how to budget. If this kind of topic interests you, then sign up to my channel, subscribe, hit the button, and you’ll be notified whenever I upload new content.
So when it’s time to open your portfolio statement, are you like, “Oh my God, what’s going on? How much do I have left?” These times are pretty difficult. The S&P 500 took a beating, a lot of the good stocks have lost a lot of value. Are you at the point where you’re afraid to look at your portfolio? You’re afraid to look because you don’t want to know how much it’s at, and when you finally get the courage to look at it, all you see is red. It’s the losses.
Believe it or not, there are a few things that you can do when this happens. I’ve been through a few market corrections, and the market always comes back up, but there’s a few things that you should consider at this stage of the game. Thing to remember is that when it’s difficult, it’s when you learn the most, so keep that in mind.
So one thing you can do is you can think about triggering losses in your taxable accounts. Taxable accounts or RRSP, non-TFSA, non-RESP, those are registered accounts, RIFs, all that is registered, and when investment income is earned in those accounts, it’s non-taxable. What I’m talking about is your taxable accounts, your regular accounts. If there are investments there that have losses, then you could think about triggering those losses. You can apply that loss to gains in the past up to three years and also gains in the future.
The Canadian government doesn’t want you to be able to sell investments to trigger a loss and then buy them the next minute. Otherwise, everybody would be doing that. So they created this term called the superficial loss. If you trade something 30 days before or 30 days after, it could be considered a superficial loss, and that loss will not be qualified for tax deductions. So you just have to keep that in mind.
To avoid superficial loss, we should consider sidestep maneuvers. An example is if you own XYZ and you’ve lost money and you want to trigger a tax loss, what you do is you sell your XYZ and you buy something similar, like Royal Bank, and you do it the same day. The minute you sell your XYZ, you buy the RBC to avoid the superficial loss. So you’re basically buying a similar asset class. If you look at the performance of XYZ and Royal Bank, if you look at the stock performance of those two, they’re very similar, this high correlation.
Another thing you can do is instead of buying RBC, you can buy something like a Canadian bank ETF, like ZWB.TO. By buying an ETF, you’re avoiding some of that company-specific risk, so you’re a little bit more diversified. You’re hitting two birds with one stone. One, you’re triggering that tax loss, and number two, you’re diversifying your portfolio a little bit more.
Another thing you should do is to buy more of your best stocks. I’m sure you’ve identified some favorites after these turbulent times or some stocks that have weathered the storm pretty well. Take advantage of the low prices. It’s a good moment to gradually get back into the market.
One important thing to keep in mind is to reinvest your dividends to take advantage of low prices. To do this, call your financial institution and ask them to put your investment in dividend reinvestment programs. You can also watch my video on this topic after watching this video.
Another recommendation is to get a second opinion before making major decisions. It’s always best to get an impartial expert to look at your situation and help you crunch your numbers. I offer one-on-one consultations, and you can book some time with me using the link in the video description below.
Don’t forget that I have two free guides available for download. One is a step-by-step guide for do-it-yourself investors, and the other is about how to save money and build critical habits for wealth. Both guides are yours for free, so make sure to check them out.
I hope you found these tips helpful. If you enjoyed the video, please hit the thumbs up button and subscribe to my channel for more videos. Thanks for watching, and I’ll see you soon!