dsmWealth April 2, 2020

Our economic health has taken a beating under the coronavirus onslaught. The challege now: recovery.

Iowa Stocks and Investor Options: What Now?

BY STEVE DINNEN

Hats off to shareholders of Heartland Express Inc., the North Liberty-based trucking firm. When the whole pandemic mess rolled through Wall Street, Heartland shares sagged a mere 27% from their year-to-date high. Contrast that to Winnebago Industries, down 73%, or Lee Enterprises, off 76%, or Meredith Corp., which gave up 67%. All those stocks have recovered somewhat from those lows, but there’s not a single company in Iowa that has escaped the carnage wrought by investor fears over what this COVID-19 means to the economy.

So now what? Now that the share prices are down, what is your next course of action?

At this point you have several options:

• Do nothing. Just sit on your stocks and bonds and mutual funds and ETFs and await better days ahead.
• Liquidate. If you think the situation will deteriorate further, you can sell off your holdings and go all cash, and await better days.
• Speculate. If you bought Boeing Co. stock on March 13 for $170 a share, you probably weren’t happy to see it fall 45% in just one week. Yet one week later it rose 70%, to $162.
• Dollar cost average. While we tend to think of this investing method as a way to average out the cost basis of a stock that is rising in value over time, it works on the downside as well. Buying 1,000 shares of Principal Financial Group Inc. at its 2020 high of $57.16, and then 1,000 more at its low of $23.31, gives you an average cost of $40.23. That can take some of the sting out of being all in at $57.16.

Still, this is a very dynamic situation, subject to change in the blink of an eye as more news unfolds on the scope of the pandemic, and as Washington reacts with stimulus and bailout plans. Earnings guidance from most companies has been scrubbed for 2020 and even into 2021. Analysts have suspended many of their recommendations, or marked stocks as a hold. They’re looking for glimmers of hope, though. Casey’s General Stores, for instance, could be viewed as a defensive stock.

At some point the pandemic will pass, and the recession it towed behind it will fade. Let’s hope, for the safety of our health and our economy, that day is soon.

So How About You?
How are you handling this market upheaval and instant recession? We’d like to hear your thoughts on what you plan to do to protect your assets during the coming months as the nation deals with the pandemic and the turmoil it has created. And we'd like to hear how you think it might affect you if you’re in your 30s, 40s, 50s, or 60-plus.

Send your thoughts to dsmWealtheditor@bpcdm.com. Include your age group and whether we can use your name if we create a dsmWealth story with these responses.

Scrambling in a Market Collapse—and a Tax Quandary

BY STEVE DINNEN

How is it that I have lost my shirt in the stock market this past month, yet still owe a ton of money to the IRS? I blame Uncle Sam and the way he treats different investment vehicles. You can blame him, too.

My wife and I have several investment accounts—two IRAs, two Roth IRAs, and two standard taxable accounts. When the market went into a free fall in March, I liquidated a number of positions.

All the money losers were shorter-term investments that were held in either an IRA or a Roth. There’s no tax consequence for either a loss or profit with a Roth, while the IRAs are taxed only upon withdrawal from the account (and as ordinary income, not as capital gains).

But in my scramble to stanch losses, I sold a lot of stock that had seen some very nice gains over the years. My Adobe shares rose 14-fold between acquisition and disposition dates; they’re now up 10-fold. It and other profit- generating stocks all were in taxable accounts. I think I did the right thing, as several positions have since turned to losers.

This leaves me with an opportunity to tax harvest. But it’s too early in the year to fiddle with that. And I’m hoping the market will recover as we move through the pandemic woes, and I can pay taxes on capital gains or enjoy some Roth profits for a change.

Financial Opportunities During Current Health Crisis
BY MATTHEW HELTHFRICH FOR KIPLINGER

Headlines over the past weeks have been riddled with two serious threats to the health and well-being of people across the U.S. The first and obvious threat is the novel coronavirus (COVID-19) outbreak. The other obvious danger is the stock market, which entered bear market territory for the first time in 11 years.

In the world of competitive car racing, they say that races are won and lost in the curves. Similarly, in the world of investing, success is driven (or stalled) in times like these through your actions and inactions. There is a tremendous challenge in financial decisions, however, when panic strikes the world like it has recently. Panic—caused by this sudden "curve" in the market—naturally creates added stress and fear for everyone, inhibiting the ability to make sound and opportunistic financial decisions. >> READ MORE

The One Document Americans Need Now: Power of Attorney
BY BETH PINSKER for REUTERS
If you live in the United States and really want to be prepared for the coronavirus, experts say you need a fully executed power of attorney, which designates a trusted person to take over your finances should you become incapacitated.

This is not something most people want to consider right now—or ever, for that matter.

"It always felt expensive, and it’s not fun to think about your mortality," said Heidi Schoeneck, a 47-year-old divorced mom from Connecticut who recently completed a will online and plans to heed the warning to get the rest of her paperwork done.

A financial power of attorney is the most useful document because of the possibility that you could be put out of commission for weeks if you fall ill and are unable to take care of your financial affairs. >> READ MORE