The recent global stock market turmoil has left many individual investors feeling uneasy about the state of their 401(k) accounts. The sudden drop in stock prices on Monday was a stark reminder of the volatility that can come with investing in the stock market. However, financial experts are urging investors not to panic and make hasty decisions with their retirement savings.
Quincy Krosby, chief global strategist at LPL Financial, reassures investors that market downturns are a normal part of the investing cycle. In fact, these periods of volatility can present buying opportunities for fund managers to capitalize on. Krosby emphasizes that it’s essential to remain calm and remember that there are always opportunities on the other side of the storm.
Andy Smith, executive director of financial planning at Edelman Financial Engines, advises investors to separate their emotions from their money. He emphasizes the importance of focusing on the long-term perspective rather than trying to time the market. Smith highlights the futility of trying to predict the best time to enter or exit the market, as it is virtually impossible to do so accurately.
As a 401(k) investor, the best course of action is to save consistently, diversify your holdings to minimize risk, and periodically rebalance your portfolio. Smith recommends checking your asset allocation at least once a year to ensure it aligns with your financial goals and risk tolerance. If your portfolio has deviated from your target allocation, you can easily adjust it through your plan’s online portal.
It’s crucial to remember that bear markets and market downturns are a natural part of the investing landscape. Despite periodic setbacks, the long-term trend of the stock market has been upward. For example, the S&P 500 has experienced significant growth over the years, with more positive annual returns than negative ones since 1960.
In conclusion, while a bad day for stocks may be unsettling, it’s important not to make impulsive decisions with your 401(k) account. By staying focused on your long-term goals, maintaining a diversified portfolio, and periodically rebalancing your holdings, you can navigate market volatility with confidence. Remember that patience and discipline are key virtues when it comes to investing for the future.