Following is a helpful article on survival tips for a rocky market.
Nobody likes it when stock prices go haywire. Up substantially one day; down precipitously the next. It’s enough to make even seasoned investors sweat. But instead of getting jumpy when volatility picks up, stay calm and review the basics. Knowing what to do — and what not to do — will help you make better decisions about your retirement investments.
Shrug Off Paper Losses
Yes, watching your retirement account balance drop is unnerving. But as long as you don’t sell, the losses your investments experience when the market declines are just “paper losses.” You haven’t actually lost any money if you continue holding those investments. Over time, your portfolio may be able to recover from its paper losses. Once you sell your investments, however, the losses are locked in – they’re real.
Stay in the Game
If you’re uncomfortable with falling stock prices, remember that selling may do more harm than good. Although past performance doesn’t guarantee future results, history shows that market declines have often been followed by periods of price gains. In fact, over the long haul, the stock market has always eventually recovered from its losses. If you move out of stocks, you won’t be able to benefit from potential upswings in the market.
Diversifying* your portfolio by investing in a range of investments in several different asset classes helps control risk. If one investment type loses value, the others may gain or hold steady. If your retirement account isn’t well-diversified, think about making some changes.
Investing for retirement is a long-term goal. Although there are no guarantees, stocks have the potential to provide inflation-beating returns over the long term. As you get closer to retirement, however, you may want to adjust your asset allocation to reduce risk in your portfolio.
Regardless of what the market is doing, stay focused on why you’re investing in the first place. By focusing on your goal, you’ll be more likely to make the right moves.
Diversification does not ensure a profit or protect against loss in a declining market.
Downs and Ups: S&P 500 Annual Returns
- 1962 -8.73%
- 1963 22.80%
- 1966 -10.06%
- 1967 23.98%
- 1974 -26.49%
- 1975 37.2%
- 1981 -4.9%
- 1982 21.4%
- 1990 -3.2%
- 1991 30.6%
- 2002 -22.1%
- 2003 28.68%
- 2008 -36.99%
- 2009 26.45%
The S&P 500 index is an unmanaged index of the stocks of 500 major U.S.corporations.
Past performance is no guarantee of future returns.