King Henry VIII’s wife, Jane Seymour, had recently died from an infection after childbirth. The king now wanted to re-marry as quickly as possible. In early 1539, he reached out to German artist Hans Holbein.
Would he be willing to paint portraits of a few potential candidates?
Anne’s portrait impressed Henry. So about one year later, she left her hometown to live with the most important ruler in English history.
But problems arose shortly after she arrived. Henry didn’t think Anne looked much like her picture. “I like her not! I like her not!,” he supposedly announced.
Six months later, the king annulled the marriage.
We’re often the picture of optimism when we invest our savings.
We envision a certain (bright) future. We develop certain (rosy) expectations. Hope defines our outlook.
But an investment in the 500-largest U.S. stocks loses money on 46.4% of days. And according to author Ben Carlson, “the average down day is a little worse than the average up day is good.”
When our investments underperform, disappointment quickly sets in. We get frustrated, angry. We may even feel a bit embarrassed, convinced that we’ve made a poor financial decision.
Anne of Cleves surely felt disappointed, angry, and embarrassed. She had envisioned a certain future, and nearly the opposite occurred.
The recent, award-winning Broadway musical SIX casts Anne in a starring role. And her character describes the marriage from her perspective:
“So, I guess you already know what happened next. How I came to England, hopeful, summoned after the king saw my portrait. And how I, with my meager looks the way they are, didn’t live up to his expectations. I mean, it’s the usual story, isn’t it? The savvy, educated, young princess deemed repulsive by a wheezing, wrinkled, ulcer-riddled man twenty-four years her senior. Rejection! Rejection from a king.”
A pretty daunting, high-profile setback, right?
Even so, Anne focused on her best-remaining path forward. And here’s what she could control: how she responded to her own dashed expectations.
We can’t do much to prevent investment losses. But we still have choices after a market setback. We can control how we respond to the situation.
And in investing, that may include tax-loss harvesting. When we take this path, we “harvest” losses in our taxable investment accounts. In doing so, we salvage tax savings from the investment wreckage.
When you tax-loss harvest, you embrace the loss. You sell your investment at a low point, locking in the outcome. You then replace your investment with a similar, but not “substantially identical,” one.
It’s not ideal. You’d prefer to see your investments grow. Your managing your response in a productive way, though.
When you do that, the IRS allows you to deduct that “lost” amount from your ordinary income taxes. The loss can offset up to $3,000 in income each year.
And you then can “carry forward” any unused losses indefinitely.
When King Henry VIII sought an annulment from Anne of Cleves, she didn’t panic. Instead, she deftly managed her response.
The Historic Royal Palaces Research Institute explains what that approach earned her:
“The King promised Anne that if she remained in England, she would be granted the honoured title of ‘the King’s Sister’. Anne would be bestowed with vast amounts of property, such as Henry VII’s Richmond Palace and later Hever Castle, the former childhood home of Anne Boleyn. Anne also received an annual income of £500 as well as revenue from several estates. She was allowed to keep all her dresses, jewels and a metal plate.”
Or as Anne’s character in SIX says:
“I mean, how could anyone overcome a fate as devastating as being forced to — to move into a resplendent palace in Richmond, with more money than I could spend in a lifetime and not a single man around to tell me what to do with it!?”
At some point, your investments will let you down. Your optimism may falter.
But even amid a daunting setback, you don’t need to panic. Instead, just try to find your best-remaining path forward.
Suggested Reading
If you found this article insightful, you may also benefit from reading:
Hi, I’m Kevin. I’m a financial advisor in Washington, DC. I’m also the founder of Illumint, an independent financial planning company in the District that specializes in financial planning for Millennials like you. I empower our generation with the confidence to invest an inheritance, financial gift, or extra savings. If you’re new to Financially Well, welcome – you now have access to the leading finance podcast for Millennials. I encourage you to read, watch, or listen to the ideas I’ve shared about making your money work for you. And then when you’re ready, please send me your thoughts & questions!