Welcome to the April edition of FAQs and RAQs!
Here we answer client questions—some asked Frequently, others Rarely.
FAQ: Should I “buy the dip” in the stock market?
That depends on your time horizon. If you don’t need the money for 5 to 10 years (or longer), we’d argue the market is generally a buying opportunity—whether it’s dipped or not.
Buying the dip sounds simple. But in practice, many investors hesitate. Here’s why:
1. It can feel irresponsible.
When the news is negative, buying stocks can feel reckless, even if it’s the right long-term move.
2. Catastrophizing.
People worry the market will fall even further. But remember: markets already factor in a lot of the bad news you’re hearing.
3. Short time horizon.
Investors fear they’ll regret buying if the market drops again next month. But that’s short-term thinking. The real focus should be: where will the market be 5 or 10 years from now?
In reality, "buying a dip” is like a lot of things in life: if it’s right for you, stop overthinking and just do it!
RAQ: I’ve heard rumors that Congress might change the tax deductibility of municipal bond interest. Should I be worried?
Short answer: We don’t know what Congress will do, but we wouldn’t be overly concerned.
As the Trump administration prepares to propose tax cuts, there are indeed rumors that one way to pay for them might involve reducing the tax break on municipal bonds.
While no one can say for certain how this will play out, we don’t view it as an all-or-nothing scenario. Congress could decide to end the tax exemption for certain types of bonds such as those issued by universities or private-activity bonds, like those used to finance airports or stadiums.
Even if changes are made, we expect they would apply to new bond issues going forward, while existing bonds would likely be grandfathered under current tax rules.
Of course, all of this remains speculative. In the meantime, we don’t believe investors should be overly concerned, and we’ll continue to keep you updated as developments unfold.
Have a question? Drop us a line at carlsongroup@rwbaird.com. We'd love to hear from you!
All investments carry a level of risk, including loss of principal. Fixed income is generally considered to be a more conservative investment than stocks, but bonds and other fixed income investments still carry a variety of risks such as interest rate risk, credit risk, inflation risk and liquidity risk. In a rising interest rate environment, the value of fixed income securities generally declines and conversely, in a falling interest rate environment, the value of fixed income securities generally increases. Municipal securities investments are not appropriate for all investors, especially those taxed at lower rates.