The S&P 500 fell 20% from a February high to an April low last month but has since bounced back more than 20%. The window of opportunity that the market presented was open wide, but only for a very short period of time. You had to be ready to act, and last month I published a list of things you could have done to take advantage of the stock market’s downturn. Since there are few things that annoy me more than someone who doesn’t take their own advice, I’m sharing what I did in response to the stock market drop. There’s some good, but also some missed opportunities as well.
Making early IRA contributions
One of the best things I did in light of the stock market crash in April was make an early 2025 IRA contribution to my wife’s IRA account. We had just made her 2024 contribution in early April ahead of the 2024 contribution deadline. That $7,000 contribution went in just as the S&P 500 had fallen 15% — call it dumb luck. After stocks kept falling that second week of April, we made an additional $5,000 contribution towards her 2025 contribution amount. This is a relatively new IRA account we started as a spousal IRA three years ago, so the new contributions basically doubled the size of her account.
She’s already gotten a 15% return, or $1,800 gain, on the $12,000 of new money that went in. Plus, at a marginal tax rate of 22%, and fully deductible contributions, we saved $2,640 in federal taxes as well. One step I missed in hindsight was doing a partial Roth conversion on one of my personal IRA accounts. I could have used the tax savings from my wife’s contributions to cover the cost of such conversion, effectively zero’ing out any future federal tax refund we may be owed. While I could still do a conversion, the market’s big rally makes the math behind Roth conversions less incentivizing.
Putting some savings to work
For the last couple of years I’ve been doing a rolling t-bill strategy with a portion of our household savings. The strategy is pretty simple and anyone can do it. I’ve generally always owned four treasury bills maturing once per quarter throughout the year. Typically when one t-bill matures, such as one did in January 2025, I then go out and buy a new one (for January 2026). Recently, when my latest treasury bill matured, I invested the proceeds into a market index fund instead of rolling the proceeds into a new treasury bill.
I didn’t feel too much risk in doing this because I still had three more treasury bills maturing later in the year. Even with 25% of my “savings brokerage account” in stocks, it’s still very conservative. If anything, I could have given more critical thinking to selling my next maturing treasury bill early (July 2025) and investing those proceeds as well. The trade-off would have been giving up 3-4 months of interest, but we know now I could have gotten a 15% return very quickly.
Personally though, because my professional income is so heavily tied to stock market performance as is, I’ve generally been more conservative with taxable brokerage accounts.
One note here on savings vs treasury bills vs investing… high yield savings accounts have grown in popularity as interest rates have risen over the years. However, my personal high yield savings rate has fallen from a high of 4.30% last year to a current rate of 3.60%. While some are still at 4.0% or higher, I’ve been happy with the full service offerings of my provider, so I’m content to leave it as is. But, today’s treasury bill rates of 4.35%-4.15% (3 month to one year treasury rates) means you should be directing more “safe” money to treasury bills instead of high yield savings.
Furthermore, by having that money in treasuries in a brokerage account, it will make it easier to invest in stocks more broadly if the opportunity presents itself (such as it did last month). If the money is in a high yield savings account, and you have to move it to your brokerage, that’s one step that could slow down your decision making process. It’s like eating healthy: it’s much easier to eat healthy if you don’t buy the cookies at the grocery store in the first place. For investing, it will be easier to convince yourself, “now is the time buy stocks” if the money is already in your brokerage account to begin with.
Simply put: consider keeping more money in your brokerage account and less in your bank account, even if you just use that money to buy treasury bills.
Looking back, looking ahead
Whenever there are major events in the market, I always try to look back at the actions I took and analyze how I did. I usually end up finding that I could’ve done better, but I could’ve done worse too.
What’s very neat about navigating markets is its kind of like being an athlete without the career arc at which your skills are guaranteed to deteriorate. Lebron James, for example, still defies logic with his skill set in the NBA at age 40… but, eventually he will be forced to retire because he won’t have the athletic ability to keep playing. While his skills may never go away, his ability to use them effectively will.
Investors on the other hand, mind-willing, can continue to improve their skills over their entire lives. Warren Buffett, for example, just announced his pending retirement at age 94 years old.
This means that no one has a good excuse for failing to self-study their actions during market events. Now, many clients probably work with people like us so they don’t have to worry about any of this. In that case, your self-analysis might revolve around studying how you reacted to the advice we were giving. Did you engage with our communications? Did you do nothing? Did it work out well? Do you wish you did something? Did we suggest something last month that now looks incredibly smart or terribly stupid? These are the things you should be analyzing to improve your skills as an investor.
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