Market volatility is a term used to describe the daily fluctuations, large and small, of the stock market. While volatility is an inevitable element of investing, markets have tended to reward those investors who don’t get rattled during market declines and stick to a long-term investment strategy. There are a wide range of factors that may affect market volatility such as world events, performance of certain sectors of the market, political factors, and natural disasters. Most of these factors are beyond anyone’s control and happen unexpectedly. So, what is a retirement investor to do when volatility strikes?
1. Review Your Portfolio. Know your investment mix and be sure you are invested in the appropriate asset classes (based on your risk tolerance and time horizon to retirement). Volatile market periods reinforce the need to diversify (while diversification does not guarantee against loss of principal, it can help spread your risk among different asset classes and market segments).
2. Check Your Contribution Rate. How much you contribute each month can directly impact how much you will have at retirement. Have you done a retirement needs calculation? Do you know how much you should be contributing each month to reach your goal? Are you increasing that amount each year or more often based on your income and age?
3. Rebalance. This will readjust your portfolio back to your original investment strategy attempting to "sell high and buy low." Essentially, when you rebalance you tend to sell some appreciated assets and purchase others with lower valuations. Regular rebalancing (as a rule of thumb, at least once a year) may increase the overall return of your portfolio over time.
4. Consult with a Professional. Don’t go it alone. Financial planning resources are available through our retirement plan advisor.
Remember, staying invested in times of market turbulence will help you participate fully in potential market gains. While there is never any certainty in the market, it is worth noting that some of the sharpest market declines were followed by steep rebounds. The data in the chart below shows performance during and after periods of market recession.
performance during and after recessions1
Source: Morningstar DirectSM 2018. Past performance is not a guarantee or prediction of future results.
History has taught us that volatility is to be expected. The implications surrounding the current turmoil should call on plan participants to focus on what they should otherwise be doing on a regular basis. For more information on investment choices for your retirement plan, please contact MCF Advisors.
For more information, Contact MCF today!
MCF Advisors, LLC (“MCF”) is an SEC-registered investment adviser. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this presentation will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from MCF. To the extent that a reader has any questions regarding the applicability of any specific issue discussed herein to his/her/its individual situation, he/she/it is encouraged to consult with the professional advisor of his/her/its choosing. MCF is neither a law firm nor a certified public accounting firm and no portion of the webinar content should be construed as legal or accounting advice. A copy of MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are an MCF client, please remember to contact MCF in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing / evaluating / revising our previous recommendations and/or services. The scope of the services to be provided depends upon the needs of the client and the terms of the engagement.