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- I started picking stocks and pouring money into cryptocurrencies 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 to watch out for tax implications and to switch from my current portfolio.
In mid-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 cryptocurrencies. Not knowing too much about either, I decided to take some of the money and become a beginner investor, for the first time.
I opened an account with a commission-free investment platform and deposited thousands of dollars. Then I bought stocks of companies I was a customer of and cryptocurrencies that made headlines, from Bitcoin to Dogecoin. I continued with this purchase for a year, until I decided that I was being too reckless with my financial investments and wanted to take a break until I was able to understand more about where I was investing my money.
However, as we come to the end of 2022, I am guilty of not doing much in the way of stocks and cryptocurrencies in my investment account which I bought in 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 to correct the stock and crypto mistakes I’ve bought that are now costing me quite a bit of money.
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 (tech and travel). To offset those losses, certified financial planner Nico Felipe says it might 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 reduces the impact of any single stock or cryptocurrency going down,” he says.
2. Get help if you can’t do it yourself
A lot of the mistakes I made as an investor happened because I didn’t have much knowledge of how the market worked and I didn’t have a strategy. Instead, I followed the advice of friends who picked stocks based on headlines rather than research.
If I’m struggling to figure out an investment strategy, CPA Kyle Marquardt recommends reaching out and getting help from a financial advisor.
“A financial advisor can help a person understand their options and advise them on the best way to move forward,” Marquardt says. Another benefit, he continues, is that a financial professional can help me come up with a plan that takes into account my financial goals and current risk tolerance.
3. Recognize potential tax losses
As we approach the end of the year, Chartered Financial Analyst Matt Mondouk says a good first step is to determine whether a stock or cryptocurrency is holding an unrealized loss.
If so, he says 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 given year. Amounts in excess of $3,000 may 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 regarding this, such as the investor must not redeem securities sold in any account they manage for 31 days to avoid a sell-off. If you are investigating the tax implications of your investments, consult a tax professional for details on your specific situation.
4. Don’t get attached to your possessions
For over a year I was stuck on what to do with the stock and cryptocurrency positions I had and was afraid to make new investments. Certified financial planner Jeff Bernier says a good way to overcome that mindset is to use what I did during the pandemic as a way to learn a lesson and move on to create a new plan for the future.
To do this, he recommends asking yourself what your future goals are, what rate of return you want to see in your next investment plan, and what combination of asset classes expect returns to meet those goals.
If you feel bad about selling stocks or cryptocurrencies for less than you paid, he suggests remembering that securities don’t care what you paid for them. “Knowing what you know now, if you had the same amount of cash that 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 the parts of your financial portfolio that you have more control over — like savings, earnings and learning more about personal finances — and ignore the things you can’t control, like the market, the economy or the Treasury. That way you can get back on track.