You may have heard the stock market referred to as “volatile.” This means it goes up and down in value, on a daily basis. When the market drops significantly, it is often worrisome to investors. But here are three things to keep in mind when it comes to saving for your retirement:
1. Keep a Long-Term Focus
Changing the way you have your money invested may seem like a good idea, but it might actually have a negative effect on your long-term growth. Experts generally recommend you maintain a diversified investment strategy that’s built to help withstand the short-term ups and downs of the market. Making decisions based on emotions or recent performance may result in missing out on any upswings that can come as quickly as a decline. Attempting to time the market may result in missing the best days of the recovery and have a long-lasting impact on investor portfolios.
IMPACT OF MISSING THE BEST RETURN DAYS
Growth of $10,000 invested in the S&P 500
January 1, 1980 – December 31, 2019
2. Keep Contributing
When markets decline many investors want to stop their contributions until they go up again. The best practice is to continue with a consistent contribution amount regardless of current conditions. This will take advantage of a concept known as “Dollar Cost Averaging,” helping you to benefit from purchasing additional shares while the market is low.
3. Check Your Investment Mix
Many retirement plans offer specific investments that diversify automatically based either on your projected retirement date or risk tolerance. These investments are designed to provide a disciplined strategy that considers market volatility and time horizon. You should view recent investment performance in light of your overall investment objective, risk tolerance, and time horizon before making any changes to your account. Unless these or surrounding circumstances have changed, we recommend staying the course while continuing to periodically review your account to ensure it is appropriately invested.