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Peter Mallouk

Portfolio > Economy & Markets

Peter Mallouk: 4 Ways Investors Burn Themselves in Bear Markets

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Financial advisors guiding clients through this year’s market turmoil might consider a few tips from Creative Planning CEO Peter Mallouk, who recently outlined four pitfalls that investors should keep in mind to avoid “self-inflicted wounds” in their portfolios.

“Bear markets are hard enough to get through without getting in your own way,” Mallouk tweeted Monday, introducing a Twitter thread with succinct insights.

1. Triggering the wash-sale rule.

This rule can prevent them from taking a tax deduction for selling a security at a loss if they repurchase shares, or a substantially identical vehicle, within 30 days.

“When tax-loss harvesting is done improperly, it can trigger the wash-sale rule, disallowing your capital gains tax deduction and resulting in a higher tax bill than expected,” Mallouk wrote. “This results in a completely wasted opportunity to reduce your tax bill.”

2. Getting spooked by volatility.

“The key to success during a bear market is to have an investment strategy in place to help manage volatility and put you in a better financial position once the bear market ends,” he tweeted. “This is not the time to abandon the plan.”

3. Getting wrapped up in the news.

“Don’t let disturbing news headlines cause you to lose sleep,” Mallouk advised. “News headlines and talking points are often exaggerated to drive ratings. They are interested in eyeballs and listeners, not your financial wellbeing.”

4. Following forecasters.

“No one knows what the stock market will do,” he wrote. “Anyone that shows confidence around the direction of the stock market is someone that should be ignored.”

He concluded the thread:

“Focus on your investment plan, never have a portfolio that is completely at the mercy of the market, and don’t try to time the market based on pundits and the media. Stick with the game plan and you, and your portfolio, will survive and thrive!”


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