If you’re heavily invested in the stock market, you know what a volatile year 2022 is turning out to be. By the middle of June, the S&P 500 index had dropped 21.3% from the first of the year.
Most experts cite the following factors as contributing to this downturn and continuing uncertainty about the stock market:
- High inflation
- Aggressive Federal Reserve monetary tightening
- Russia/Ukraine war
- Slow economic growth
- Supply chain bottlenecks
Best and Worst Stock Performers
Despite the overall market loss, not all stocks have lost value. In fact, some have performed quite well. Others, however, including some well known names, have basically tanked. The five best and worst performing S&P 500 stocks so far this year are listed below:
- Occidental Petroleum – up 103.1%
- Hess – up 43.1%
- Valero Energy – up 41.5%
- ExxonMobil – up 40.0%
- Halliburton – up 37.1%
- Netflix – down 71.0%
- Etsy – down 66.6%
- Align Technology – down 64.0%
- PayPal – down 63.0%
- Bath & Body Works – down 61.4%
As for the cryptocurrency market, old stalwart Bitcoin had seen a 60% drop in price during the first half of 2022. Ethereum had preformed even worse, down by over 70%.
Given this exceptional volatility and a less than optimistic outlook for the rest of 2022 and on into 2023, many analysis are advising their clients to “stay nimble” and adjust their allocations between value stocks and growth stocks.
The problem with any major adjustment, however, is that even if you want to cut your losses and divest yourself of stocks that are now losing value, their value is still likely well above what it was when you bought them. Consequently, you face paying high long-term capital gains taxes when you sell them. In this economy, that’s the last thing you need, but what are your alternatives?
Enter the Deferred Sales Trust
Unfortunately, you can’t use the installment sale method authorized by Section 453 of the Internal Revenue Code when you sell stocks, because it specifically excludes publicly traded stocks from the types of sales that qualify for its favorable capital gains tax treatment.
You can, however, utilize the Deferred Sales Trust, the legal, tested and proven proprietary installment sale offered only by the Estate Planning Team. In fact, the DST makes the perfect exit strategy when you sell any type of highly appreciated asset, including a concentrated stock position.
Additional DST Advantages
Not only does the DST allow you to defer long-term capital gains tax recognition almost indefinitely, it also provides you with numerous additional advantages, including the following:
- Diverse investment opportunities into any “prudent investment” of your choice
- Investment risk reduction
- Asset protection
- Enhanced wealth accumulation opportunities
- Flexible distribution structure of the secured installment sale contract you receive in exchange for selling your asset to your DST
- Enhanced estate planning opportunities, such as a possible estate tax freeze
Want to Know More?
As a savvy investor, you likely want to have full information about the DST before you make any decisions. No problem. Simply contact Reef Point. We’ll be happy to answer your questions, discuss your specific situation, and explain how the DST can make your stock portfolio adjustment a pleasant, tax-free experience.