Smart Financial Planning Strategies in a Down Market

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Written by: Madison Bennett, CFP®, CFT-I™

Market downturns are never comfortable or easy to experience. Whether the markets are driven by economic slowdowns, global events, or policy shifts, a declining market can test even the most seasoned investors. However, as a financial planner, I know that how we respond during downturns can have a lasting impact on long-term financial success. A well-structured plan doesn’t just weather the storm – it adapts and positions you for future growth and success. Here are several planning strategies that we at the Financial Consulate use with clients to navigate a down market with confidence and clarity.

 

Revisit Your Financial Goals – Not Your Fears

Market drops can stir up anxiety, but the most important question to ask isn’t, “What’s the market doing?” It’s, “Have my goals changed?” If you are still on track toward retirement, a home purchase, education savings, or another major goal, it’s likely your plan simply needs patience – not a complete switch up or revamp.

Strategy: Reframe short-term losses as temporary setbacks in a long-term journey. Avoid reactionary moves that don’t align with your true goals.

 

Keep Your Investment Mix on Track

Market ups and downs can throw your portfolio slightly off-balance – but that doesn’t mean your plan is off-track. Your investment allocation should be carefully chosen based on your goals and comfort with risk, and it’s built to weather market cycles like this.

Strategy: Instead of making big changes, consider a gentle tune-up. Rebalancing helps keep your investments aligned with your plan, and it’s a smart way to stay the course without overreacting to short-term market noise.

 

Consider Tax-Loss Harvesting Opportunities

Market losses can create a silver lining: the chance to lower your tax bill. Who doesn’t want to do that? Selling investments at a loss in taxable accounts can offset gains and even reduce ordinary income, up the certain IRS limits.

Strategy: Harvest losses where appropriate, then reinvest the proceeds in similar, but not identical, investments to stay in the market and avoid wash-sale rules. Talk with your advisor or trusted professional to see if this strategy would be beneficial to you.

 

Continue (or Increase) Contributions

One of the most effective strategies in a down market? Keep investing. Dollar-cost averaging, which is investing in a fixed amount regularly, lets you buy more shares when prices are low and fewer when they’re high, smoothing out volatility over time.

Strategy: If you have the cash flow, consider increasing retirement or brokerage account contributions while markets are down. You’re buying assets at a discount!

 

Reevaluate Emergency Reserves

Having a healthy emergency reserve fund is always a smart idea, but it is especially important in uncertain markets. A downturn in the economy may impact employment, business revenue, or liquidity.

Strategy: Ensure you have 3-6 months of expenses in a high-yield savings account or other accessible, low-risk vehicle. This prevents needing to sell investments at a loss when cash is needed.

 

Don’t Abandon Long-Term Investments

It can be tempting to pull out of the market to “wait for things to settle.” But time and time again, data shows that missing just a few of the market’s best days can drastically reduce long-term returns.

Strategy: Stay invested. Market recoveries are often unpredictable and swift. If you have a good long-term plan, then it is designed to ride through these cycles.

 

Take a Closer Look at Roth Conversions

A down market can create a unique opportunity to convert money from a Traditional IRA to a Roth IRA at a lower cost, especially if the value of those assets has temporarily declined.

Strategy: Work with your advisor to determine if a Roth conversion makes sense given your income, tax bracket, long-term goals, and other tax thresholds.

 

Lean on Professional Guidance

During periods of market uncertainty, having a steady, experienced perspective can be invaluable. A financial advisor can help you cut through the noise, assess your financial picture objectively, and stay aligned with your long-term goals, especially when emotions run high.

Strategy: Use this time to strengthen your planning team. Whether you’re reviewing risk, identifying opportunities, or simply staying on track, working with a trusted financial advisor ensures you’re making informed and strategic decisions rather than reactive ones.

Down markets are inevitable, but they don’t have to derail your financial future or plan. In fact, they often provide valuable opportunities and strategies. The key is to have a plan, stick to it, and adjust with purpose when needed.

If you’re uneasy about the markets or the economic environment, please reach out to your advisor to review your plan. If you do not have an advisor and are interested in learning more about what we do, please visit our website to learn more and/or schedule an Introductory Meeting at no cost to you. Our website is: https://financialconsulate.com/

Financial Consulate aims to help lessen the worry and burden of wealth management and enhance financial wellness so our clients can pursue relationships and true fulfillment. Choose the professionals at Financial Consulate as your Certified Financial Planners™ (CFP®) to take advantage of our educational, ethical approach to financial planning. Our services are comprehensive, including tax planning, investment planning, retirement planning, estate planning, and more. We operate completely independently and offer fee-only services to keep your vision in line with our recommendations at all times. While we have offices in Hunt Valley, Maryland, Fernandina Beach, Florida, and Gettysburg, Pennsylvania, we serve clients across the nation. To begin your partnership with a trustworthy wealth advisor, please contact Financial Consulate today.