Many investors are worried about their retirement savings due to recent market volatility. However, financial advisors say there are steps you can take to protect your money during these uncertain times. One key strategy is to have a clear investment plan and stick to it, even when markets are turbulent.
“I strongly believe in sticking to an investment policy statement that reflects my needs, and I tune out the rest of the noise,” said one financial planner from Jacksonville, Florida. A written plan can help you avoid rash decisions based on short-term market movements. Another critical step is to consider your cash position.
Retirees or those close to retirement may want enough cash to cover a year’s expenses. This can help avoid selling investments at a loss during a market downturn. Money market funds and high-yield savings accounts are good options for holding cash.
Experts also advise focusing on the fundamentals rather than trying to predict policy changes or economic impacts. If a trade war will reduce economic growth, what asset classes should you overweight in that environment?
Protecting investments amid market turbulence
” That’s different from changing your allocation because of a policy decision,” said a financial planner in Washington, D.C.
For those within five years of retirement, extra caution is warranted. This “retirement danger zone” is when market drops can have an outsized impact on your savings. Steps to take include building a larger cash cushion, shifting to a more conservative portfolio mix, and working with an advisor to implement protective strategies.
Lazetta Rainey Braxton, a financial planner and founder of The Real Wealth Coterie, emphasizes the importance of having a cash “cushion account” to provide stability and flexibility. She also advises staying diversified with a mix of U.S. and international stocks, bonds, and real estate. Regularly rebalancing your portfolio to maintain your target asset allocation is another smart move.
“This is the time to meet with your advisor to review your portfolio,” said Kimberly R. Stewart, a certified financial planner with Ameriprise Financial in Orlando. Above all, experts say to keep your long-term goals in mind and avoid getting caught up in day-to-day market drama.
Staying invested and making strategic adjustments, rather than reacting emotionally, leads to stronger long-term results,” said Lisa A.K. Kirchenbauer, senior advisor and founder in Arlington, Va. By implementing these strategies, investors can weather the current volatility and keep their retirement plans on track.
Photo by Sigmund on Unsplash