During the past few months, investors have been flooded with headlines warning of market swings and extreme volatility, threatening major companies and Main Street portfolios alike. With eyes still fixed on emerging markets overseas and speculation around regulatory changes at home, many investors may find themselves uncertain of how to best manage their portfolios to ensure that the money they've been working hard to save for retirement remains safe.
Whether your money is in a 401(k), traditional or Roth IRA, 403(b) or any other savings account, the most important thing to keep in mind as the final quarter of 2015 plays out
is to keep thinking in the long term. Since the financial crisis, the
markets have generally been performing well for everyday investors.
Contraction is a normal part of the market cycle and, with the right
strategy, it should not have a major effect on your retirement savings.
Create a solid plan.
According to the Voya Retire Ready Index study, only 17 percent of
working Americans have a written financial plan in place. With that in
mind, one of the first basic steps to avoid the consequences of market
volatility is to create a solid plan.
Consider meeting with a financial advisor
to map out your financial priorities, for both now and your future, in
order to determine how you should be allocating funds and diversifying
risk within your portfolio. Your goals and your age are important
factors for guiding how active you should be in the market, as well as
the types of risk you should assume with your investments.
When the market tumbles as it did this past August, your portfolio may
see some fluctuations. Understanding your risk tolerance will allow you
to better manage through these unsettling times. Working with an advisor
can help you hedge your investments in a manner that keeps your
portfolio -- and your nerves -- steady over the long term.
Buy low, sell high.
When you do see changes in your portfolio during a market downturn,
don't assume it's immediately time to start selling. In fact, this could
actually be an opportunity to take advantage of lower prices and add
new stocks to your portfolio.
The old investing tenet says to "buy low and sell high." Many investors tend to see stock tickers turning red
on their television screens and assume they should unload any
"unpopular" or poor-performing investments. Before making any major
buying or selling decisions, however, it's best to consult with your
advisor again to get his or her perspective on how any volatility might
impact you. Your retirement plan should be built with a long-term
investing strategy in mind, so that it is able to withstand any
unexpected turbulence.
Do a quarterly checkup. Often when the markets take a sudden dip,
many of us become instantly glued to our computer or television screens
in order to make the most educated investing decisions possible. Take
advantage of this time to actually evaluate your current strategy. For
most people, I'd recommend checking in on your investments about once a
quarter.
You can also meet with your advisor or use an online planning tool,
such as Voya's myOrangeMoney, to track if you are on the right path to
meeting your future monthly income goals in retirement. Market
volatility shouldn't necessarily be driving any changes to your
strategy, but it may help to remind you to rebalance, adjust your plan,
or revisit some important calculations. A market correction is a good
excuse to think about potential portfolio corrections.
With a 24-hour news cycle telling us that markets are down day after
day, it's easy to worry that the money you're working so hard to save
now may not be there tomorrow, when you need it most. That's why it is
important to create a holistic plan -- one that you stick to -- that can
weather the short-term ups and downs and keep you on the straight and
narrow to a financially secure retirement.
Culled from US News
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