Personal Finance

4 Ways Financial Advisors Recommend Fixing My Investment Portfolio

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  • I started picking stocks and pouring money into crypto when I was bored during the pandemic, and haven’t touched my portfolio since.
  • Financial advisors told me I should diversify my investments and bring in professional help.
  • They also recommended keeping an eye on the tax implications, and moving on from my current portfolio.

In the middle of 2020, I was bored at home and kept hearing about how so many people I knew were investing in the stock market and buying different types of cryptocurrency. Without knowing too much about either, I decided to take a chunk of cash and become a rookie investor, for the first time.

I opened an account with a commission-free investment platform and deposited thousands of dollars. I then bought stock in companies that I was a consumer of and cryptocurrencies that were making headlines, from Bitcoin to Dogecoin. I continued on this buying spree for a year, until I decided I was being too reckless with my financial investments and wanted to pause until I was able to understand more about where I was putting my money.

However, as we reach the end of 2022, I’m guilty of not doing very much about the stocks and cryptocurrency in my investment account that I bought over the past two years and my portfolio is down over 46% this year.

Curious about what I can do to fix these pandemic-influenced buying decisions, I asked financial advisors to share advice on how I can fix the mistakes with stocks and cryptocurrencies I bought that are now costing me quite a lot of cash.

1. Diversify your investments

When I first started investing in 2020, I made the mistake of buying individual stocks that were mostly in the same sectors (technology and travel). To help offset those losses, certified financial planner Nico Felipe says it could be a good strategy to diversify my investment portfolio by buying a wider range of stocks and other investments to minimize any diversifiable risk.

“Investing in different assets lowers the impact of any individual stock or cryptocurrency that crashes,” he says.

2. Get help if you can’t do it alone

A lot of the mistakes I made as an investor happened because I didn’t have a lot of knowledge of how the market works and I didn’t have a strategy. Instead, I followed advice from friends who were picking stocks based on headlines, and not based on research.

If I struggle to get clear on an investment strategy, certified public accountant Kyle Marquardt recommends reaching out and getting help from a financial advisor.

“A financial advisor can help the person understand their options and advise them on the best way to move forward,” says Marquardt. Another benefit, he continues, is that a financial professional can help me come up with a plan that considers my financial goals and current risk tolerance.

3. Recognize potential tax losses

As we’re nearing the end of the year, chartered financial analyst Matt Mondoux says a good first step is determining whether a stock or cryptocurrency is held at an unrealized loss.

If so, he says that selling the position will allow the account holder to recognize a tax-loss and up to $3,000 of tax-losses can be used to offset income in any one year. Amounts greater than $3,000 can be used to offset gains in the current calendar year or carried forward to be used in future years.

However, there are some additional rules around this, like that the investor must not buy back a security sold in any account they manage for 31 days to avoid a wash-sale. If you’re looking into the tax implications of your investments, consult a tax professional for the details on your specific situation.

4. Don’t get attached to your holdings

For more than a year, I was stuck on what to do about the stock and cryptocurrency positions that I had and was scared to make any new investments. Certified financial planner Jeff Bernier says that a good way to move past that mindset is to use what I did during the pandemic as a way of learning a lesson and moving on to create a new plan for the future.

To do that, he recommends asking yourself what your future goals are, what rate of return you want to see in your next investment plan, and what mix of asset classes have expected returns to meet those goals.

If you’re feeling down about selling stocks or cryptocurrencies at a lower price than you paid, he suggests remembering that securities don’t care what you paid for them. “Knowing what you now know, if you had the same amount of cash as you have in these securities, would you buy them today? If the answer is ‘no,’ consider selling them now,” he tells me.

Finally, Bernier says to focus on parts of your financial portfolio that you have more control over — like savings, earnings, and learning more about personal finance — and ignore the things you can’t control, like the market, the economy, or the Federal Reserve. That way, you can get back on track.

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