"Go run around the block," was my mom's advice to me when I was little and pestering her for something to do. She knew it would get me out of her hair, for at least a few minutes, and it might also help me burn off some energy.
I began to feel a little like my mother during the bear market of 2008. Investors were clamoring to do something, anything, and could you blame them? At a certain point, telling them to "stay the course" just didn't cut it, even though the sentiment was generally correct.
I wrote many columns about productive ways to use your time and energy when the market—and your portfolio—are going down, including shopping for investment bargains, rebalancing, and tax-loss selling. While I didn't specifically advise running around the block, I also urged investors to do whatever they could to burn off their nervous energy, including playing tennis and getting together with friends—anything that might get their minds off their portfolios.
And, as the market grew worse, one additional strategy became very easy to recommend: converting a traditional IRA to a Roth IRA. Yes, you'll have to pay tax on any investment earnings, plus any pretax contributions, when you make a conversion. In exchange, however, you'll be able to make tax-free withdrawals in retirement. Withdrawals from a traditional IRA, in contrast, are fully taxable.
So, why did making a conversion start to look like a better and better bet as the bear market wore on? ...