Financial market volatility accelerated this week, largely fueled by escalating trade tensions tied to the implementation of new tariffs across the globe. The April 2nd announcements of widespread tariffs, dubbed “Liberation Day” by President Trump, and subsequent retaliatory measures from other nations have triggered significant market selloffs, reminiscent of major historical economic shocks. This uncertainty can be unsettling for investors, making it crucial to take a step back and consider proactive measures to protect and potentially enhance your financial well-being.

Over the course of the last few days, clients have asked, “What should I be doing?” or “What’s your perspective?” I want our clients to take advantage of the advantage of volatility and focus on selling and rebalancing.

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1. Capitalize on Market Declines with Tax Loss Harvesting 

What it is: Sell and reinvest.  Tax loss harvesting is a strategy used to reduce your current and future tax liabilities by selling investments that have decreased in value. By realizing these losses, you can offset capital gains you may have incurred during the year, or even carry the losses forward to offset future gains and a limited amount of ordinary income. In a volatile market like the current one, opportunities for tax loss harvesting may arise as some of your investments experience temporary declines. But here’s the key: you must re-invest the proceeds into a correlated set of securities to avoid missing out on the possible recovery ahead! More on that in just a moment...

Studies show that tax-reduction strategies can boost after-tax returns by more than 1% each year. Compounded over 25 years, this could result in up to a 30% increase in your portfolio.

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The Tactics: The key to successful tax loss harvesting lies in identifying eligible losses and understanding the "wash-sale rule." The wash-sale rule states that you cannot claim a tax loss if you buy a "substantially identical" investment within 30 days before or after selling the losing investment. To effectively harvest losses without violating this rule, you can:

• Sell the tax lots that have unrealized losses. In many cases, those will be stocks, mutual funds and ETFs you purchased earlier this year when the market was higher. Then reinvest in a different set of securities with similar characteristics.
• To maximize the benefit of tax loss harvesting in the future, purchase individual stocks rather than mutual funds or ETFs. That way, you can have more tax savings opportunities in the years ahead. This can be difficult to manage on your own, but at Evergreen Wealth, we put our clients in portfolios with hundreds of securities where we strive to wring out every dollar of savings for you

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2. Evaluate the Responsiveness and Support of Your Financial Advice

Why expert advice matters - and can either be a waste or totally worth it: Market volatility and economic uncertainty underscore the importance of receiving timely, relevant, and personalized financial advice. In a good market, it’s easy to take a passive approach.  We all have different goals and investment priorities - and importantly - we handle the emotions of volatile markets differently. Your advisor should be proactive in addressing your concerns, explaining how current events might impact your portfolio, and ensuring your strategy still aligns with your evolving needs and risk tolerance.

Here is what I think of as table stakes when it comes to professional advice you receive:

• Personalized guidance: Advice should be tailored to your specific financial situation, goals, and risk tolerance, not a generic market commentary. At my firm, we aim to deliver deeply personal advice by listening and using technology to optimize every decision.
• Clear explanations and proactive communication: Your advisor should clearly explain the potential impacts of the trade war and market volatility on your investments and the rationale behind any recommended adjustments.
• Coaching through the markets: A good advisor can help you stay calm and avoid making impulsive decisions driven by fear during market downturns. While adjustments during volatility might be appropriate, emotion-driven reactions can be potentially catastrophic for your long-term investment goals.
• Continuous discovery: Your advisor should engage in ongoing conversations to understand your explicit and implicit needs, adapting advice as your life circumstances change. In my view, volatile markets are a great time to re-asses whether the existing plan still meets an investor’s needs!

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3. Analyze Your Investment Strategy's Resilience and Your Ability to Withstand Volatility

What do I mean by this? Well, the current market environment may necessitate a critical review of your investment strategy for two reasons: First, to ensure it remains appropriate for your long-term goals and second, importantly, that you are comfortable with the level of volatility it entails. A well-constructed strategy should be able to weather market downturns without causing you to make emotionally-driven mistakes, such as ‘selling low’.

Drivers of long term success: A resilient investment strategy in a volatile environment often includes:

• Diversification: Spreading your investments across different asset classes (stocks, bonds, commodities, etc.) and sectors can help reduce the impact of any single investment performing poorly. Now is the time to re-assess your allocation across stocks, bonds, cash-like vehicles and other asset classes (such as real estate).
• Alignment with risk tolerance: Your portfolio's asset allocation should match your comfort level with market fluctuations. If the recent volatility is causing you significant anxiety and the urge to sell, your risk tolerance might be lower than your current allocation suggests.
• Long-term perspective: Assuming that your time horizon - the period for which this money is invested - is many years into the future, you must first remember that investing is a long-term endeavor. Very few investments are get-rich-quick opportunities. And those that are, inherently come with equal amounts of downside risk. Short-term market fluctuations are normal with just about any investment, and trying to time the market can be detrimental to achieving your long-term goals.
• Avoiding Speculative Assets: As Evergreen's philosophy emphasizes, it's prudent to avoid investing in speculative, non-productive, or high-fee assets, especially during uncertain times.

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Conclusion:

Choppy markets can be gut wrenching, and also a time for self-reflection and wise action. By considering strategies like tax loss harvesting, critically assessing the quality of your financial advice, and ensuring your investment strategy is resilient and aligned with your risk tolerance, you can take back control of your financial plan.

If you’re questioning what to do next, I hope you found these three suggestions useful. If you would like the perspective of my team at Evergreen Wealth, please call our team of advisors at +1 888 884 1408 . We look forward to assisting you when the time is right.

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-Bill Harris,
Founder and CEO of Evergreen Wealth

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The views and opinions expressed in this commentary are those of the author(s) and are subject to change without notice. The information provided is for informational purposes only and this material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy nor should it be relied upon for tax, legal, or accounting advice. Taxes should not be the only factor to drive an investment decision. You should consult your own tax, legal, and accounting advisors before engaging in transactions.

All investing involves risk, including the possible loss of principal and past performance does not guarantee future performance.

Evergreen Wealth Advisors, a wholly-owned subsidiary of Evergreen Wealth Corporation, is a registered investment adviser with the SEC. Registration does not imply a certain level of skill or training. More information about Evergreen's investment advisory services, Evergreen Wealth Corporation and Evergreen Wealth Advisors do not provide tax, legal, or accounting advice. Form ADV Part 2, and Form CRS can be found on https://adviserinfo.sec.gov/.