Common investing wisdom says you should stay put when markets are as rocky as they have been amid the tariff-induced downturn of the past few weeks. But some wealthy investors are looking for opportunities in the chaos, while stress-testing their current asset allocations and ensuring it aligns with their risk tolerance.
According to Denise McClain, a financial advisor and director at Hirtle Callaghan who works with high-net-worth families, her clients generally take a wait-and-see approach when stocks start sliding. “We called a lot of people when the volatility started, and they feel locked into their plan,” McClain tells Coins2Day. “That’s really important.”
At the same time, there are a few strategic moves they are also making to take advantage of the times, McClain says. Here are six strategies to consider now.
1. Seize on gift and estate opportunities
Though no investor has a crystal ball, now is an ideal time to look for well-priced opportunities, says McClain. Downturns offer unique leverage, especially for gift and estate planning purposes.
For those already planning on gifting money to children or grandchildren or funding a trust, a down market means lower valuations, which “could be an opportunity to make some additional gifts,” like to a trust or 529 account. This could be an especially prudent decision, as the lifetime gift and estate tax exemption could be reduced at the end of the year, depending on what happens with the Republican tax bill.
“Grandparents … they want to give money to their grandchildren anyway, then they might just accelerate that and put it in trust now, as opposed to put it in trust when they pass,” she says.
One other consideration is to max out retirement accounts now, before the end of the year, if possible. If the market rebounds before then, they’ll doubly benefit from the upswing.
2. Increase your cash cushion
Wealthy investors often have a sizable cash cushion. But volatility can make even the most experienced investor nervous, which is why McClain advises clients to check their cash pile in times like these.
In the event of a recession, advisors say it’s good practice to have at least six months of expenses saved in cash. But when things get really unsettling, some people prefer to have more, says McClain. Given the Trump administration has signaled it desires a reworking of the world economic order, it is likely job losses could follow (indeed, some companies have already started layoffs in response to Trump’s tariff actions).
That said, this doesn’t mean selling other positions now to attain it; that would lock in losses and potentially leave you worse off in the long term. Instead, investors can make a concerted effort to sock away a little more cash now. And in the event that you feel you have more than enough cash on hand, now could be a strategic time to deploy some of it, McClain says.
“If they’ve got something coming up, we can take a look at their portfolios, but we’re not selling off and going to cash,” she says.
3. Roth IRA conversions
Down markets are also a good opportunity for Roth IRA conversions. This involves paying taxes on the contributions now, but it also means tax-free growth for life, assuming the other IRA withdrawal rules are followed. Another benefit of a Roth IRA compared to a traditional IRA: There are no lifetime required minimum distributions, or RMDs—the requirement that you cash out a certain portion of your retirement account after a certain age. That means it benefits not only you, but potentially your heirs.
And because you’ve already paid tax on the contributions, you can withdraw them (not gains, though) at any time for any reason, without incurring a penalty. You don’t need to convert the entire IRA, says McClain. It may make more sense to convert just a piece of it and pay the taxes on that this year, and then convert more later on as needed.
“Then you’re paying the tax at that lower dollar amount, and then it goes into a Roth that can grow tax-free for the long haul,” she says.
It’s the same with a backdoor Roth strategy, or contributing to a traditional IRA and then immediately converting to a Roth. This is used by wealthy individuals who can’t technically contribute to a Roth outright. “Those aren’t long-term planning things that people have to work really hard to do. They’re kind of immediate things that they could take advantage of, that can be really helpful in volatile markets,” she says.
4. Tax-loss harvesting
Periods of volatility present an ideal opportunity for tax-loss harvesting, or selling select investments from a brokerage account at a realized loss to lower or eliminate taxes on other realized gains. That could be gains from other stocks, real estate, or business sales.
Used strategically, investors can offset capital gains or even reduce taxable income by up to $3,000 per year. If you then reinvest in a similar asset, you can benefit from the eventual market recovery.
And if you still have unused losses after offsetting all of the gains and $3,000 in income, you can roll them over to other tax years indefinitely.
“Values are low, and you sell those at a loss, and you capture that loss that can offset gains in the future,” she says. “That’s a really beneficial thing to be looking at when the markets are down.”
5. Check 529 allocations
One of the best things to do during times of volatility is checking the asset allocation of investments to ensure they are in a place you are comfortable with. That’s especially the case with 529 accounts. These college-savings plans typically have shorter shelf lives than a retirement account, meaning a downturn can greatly impact how much parents are able to pull out for educational expenses.
That said, McClain notes that many parents often pick a target-date fund option for these investments, which automatically reduces stock exposure closer to the child’s graduation date. Checking the asset allocation now could give worried parents peace of mind. At the same time, if they have a customized asset allocation of their own choosing, they may want to rethink it depending on when they need the cash.
“If you have a 3-year-old who has a 529 plan, it’s probably going to be invested in all equities,” she says. “Is that okay? They’re not needing it to go to college right away. They still have a runway.”
6. Play the long game
Overall, McClain says, clients are playing the long game. Few are changing up their strategies now, especially as it is far from clear where the White House’s policies will end up or what will happen as a result of that. Even the possibility of tax cuts is unknown for now.
With that in mind, the best thing for investors to do is stick to their financial plan.
“As long as people have a plan and they stay the course, that’s certainly what we recommend, and people have been okay with that,” she says. “We haven’t really had to talk anybody off the ledge.”
