During times of market stress when stock prices fluctuate up and down significantly, it’s normal to worry about your retirement investments. The good news is that you have likely planned for uncertainty and invested in a diversified mix of stocks and bonds which will help your retirement portfolio weather market volatility.
The most prudent action during unpredictable times like these is to remain focused on the long term objective of reaching your retirement goals and consider the potential impact each of these investor reactions can have on your portfolio.
Investor Reactions During Market Volatility
Flight to Safety
Some investors are not comfortable when the market experiences significant downturns – they feel the urge to sell their investments and exit the market.
CAUTION: If you sell out at these times, you will lock in your losses and not be able to participate as the market recovers. Instead, stay the course and let your portfolio work for you as the market becomes more stable. Typically the market ups and downs are temporary and stability eventually resumes. What’s more, historically the markets have moved on to reach even greater highs.
Stay the Course
You have invested and planned for long-term retirement goals and need to stay focused on that long-term timeframe instead of reacting to short-term market events. Stay the course and let your retirement portfolio work for you to meet your retirement goals.
Make the Most of It
In times of market stress it is a prudent decision to rebalance your investment portfolio to the target strategy. This process includes selling a portion of the positions that have held up the best during the recent market volatility and buying into the positions that have been oversold. For those of our clients that have enlisted our investment management services, this is the process that we manage for you. We will ensure your portfolio is rebalanced and aligned with the investment strategy we worked with you to create.