You might be thinking, “What is a bear market?” after hearing that the stock market is set to enter one. and “How would a bear market affect my money and me?”
You might be concerned about the impact of the recent stock market meltdown on your finances given the 40-year record high inflation rate and the recent hike in interest rates. Don’t worry if you’ve already made an investment or if you’re thinking about it. You’re insured by TurboTax, and we’re here to assist you in determining:
- A bear market is what?
- How does a bear market affect your investments and you?
What is a bear market?
- When a stock index or market declines over an extended period of time, it is called a bear market.
- A bear market typically occurs when the market declines 20% or more from its most recent top. S&P’s index fell more than 20% last week, sending the stock market into a bear market.
How does a bear market impact you and your investments?
- What should I do if my stocks and cryptocurrency fell during the bear market is the most common query we get. You can notice a loss in your portfolio on paper if you haven’t sold them yet. You don’t realise a loss until you sell your investments. In other words, you can keep the stock or cryptocurrency and wait for a recovery before selling. If the cryptocurrency or stock in question was held for less than a year, this may also be helpful. You will pay less capital gains taxes if you hang onto assets in stocks or cryptocurrencies for at least a year (assuming you have a gain).
- You can use your capital losses to offset your capital gains if you sold losing shares (known as tax-loss harvesting). Reducing the total amount of capital gains reported at tax time by a loss can help you pay less in taxes. Additionally, you may be able to offset up to $3,000 of your ordinary income, such as wages, to further reduce your tax obligation. Over $3,000 in additional losses may be carried forward to subsequent tax years.
Read more: How to Make a Budget (and Stick to It)