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When the Going Gets Tough…
…the tough keep investing. When the stock market is down and economic news is troubling, you may start reconsidering your retirement plan investments. Should you switch out of stocks for a little while? As tempting as that may be, your smartest move actually may be to step back and look at the big picture.
Expect Fluctuations
The economy and the investment markets can be cyclical in nature. In the past, economic slowdowns eventually have been followed by rebounds. (Past performance is no guarantee of future results.) So even when the markets are stormy, it’s likely that brighter days are on the horizon. If you overreact when the market is down and sell your stock investments, you could miss out on a potential recovery.
Rebalance Your Portfolio
One action you may want to take during a market decline is to rebalance your portfolio. When stock prices decline, the percentage of your portfolio that is invested in stocks may become smaller than you originally intended. That means your portfolio is “unbalanced.” To rebalance, you may want to sell some bond and/or cash equivalent investments and purchase some stock investments. Rebalancing during a decline has a bright side: Shares of stock funds may be bargain priced.
Adjust Your Attitude
Other than rebalancing, it may be best to stick with your plan and sit tight during a bumpy stock market ride. Keeping the following guidelines in mind will help.
You’re a long-term investor. When retirement is several years away, you have time for your investments to potentially recover from the stock market’s downturns.
A loss on paper isn’t a “real” loss. It’s disconcerting to see a drop in the value of a fund or portfolio in your retirement account. However, it’s only a loss on paper. It doesn’t become a real loss until you actually sell and switch out of the losing investment into something else. A market rebound can quickly erase a paper loss if the investment’s value rises.
Get Tough!
Sticking with your long-term investment strategy when the going gets tough may not be easy. But it may be the best way to ride out the storm and eventually achieve your retirement goals.
Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.
Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (800) 369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. The Representative may also be a credit union employee that accepts deposits on behalf of the financial institution.
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