Well, it’s safe to say that 2020 has been quite a roller coaster ride! There is no shortage of news being thrown at us from every possible outlet right now. Oh, and it’s not fun news so it seems like the whole world is pretty on edge.
Amid all the craziness, you’ve probably seen headlines around the financial markets going crazy the past couple weeks and especially the last few days. This has caused a lot of people to freak out and I’ve personally been getting asked by family and friends what they should do and in particular what they should do with their 401(k) right now.
I’ll start by saying that this post is in no way intended to be buying or selling advice and you should consult your financial advisor if you’re thinking about making any changes with your investments.
The following points are things I’ve told myself and my close family and friends as we all navigate through this tough time in the market:
Calm down.
Seriously, calm down. Take a deep breath, go on a run, have some wine, IDK. Do whatever you need to do to relax and stay calm.
Don’t act on your emotions or fears.
I get it! Seeing the money you’re putting away for retirement suddenly go down in a significant way is scary. If you’re a 20 something-year-old and you know you have another 30, 40, or even 50 years to go before you retire, there is no sense in freaking out and going all cash in your 401(k) right now. Why? Because you have time to stay invested and hopefully recover. Why do I say hopefully? Well because I can’t predict the future and neither can anybody else so I can’t guarantee that anything will go one way or another, but given all this volatility is coming from a lot of uncertainty and fear, it’s likely that once things settle down so will the financial markets.
Do a wellness check.
This is not the time to stop saving in your 401(k), but it can be a time to re-evaluate. If this turbulence is scaring you, maybe there are other things in your financial picture that you can examine. Do you have a rainy day fund? Are you living within your means or are you overusing credit and hurting yourself financially? Is your 401(k) properly invested according to your age and risk tolerance? Is your portfolio (401k or any investment account for that matter) well-diversified or are you placing all your eggs in one basket (aka one stock)? If you’re unsure about how you’re invested in your 401(k) and whether or not it’s appropriate, reach out to your HR department and find out who you can speak to about your account.
Consider increasing your contribution rate.
“ARE U CRAZY? Put MORE money into that mess?!” you might be thinking… Hear me out. If you can afford to save more in your 401(k) you can potentially invest while prices are lower and get rewarded if and when the market recovers. You can kind of see it like buying a designer purse at a discount and then selling it on Poshmark for 20% more later (except you don’t sell, you just stay invested until you retire) 🤣
Don’t look at your 401(k) balance every day.
One way to surely freak out is to check your 401(k) every day. The up and down of the markets is inevitable and it will always be there. Remember that if you’re saving for retirement, you’re doing it for the long run and there’s no sense in obsessively checking it every day. Of course, periodically you want to check-in and adjust as needed as you get closer to retirement, but for now, try not to check it every day as it can add to your anxiety.
Markets will go up and they will go down. We have lived through a very long bull market and this may the first time much of our generation is experiencing this kind of volatility. It’s okay to be spooked, just don’t let that fear drive you to decisions that may not be the best for you. This is a great time to check in with yourself and make sure you’re financially prepared to handle the curve balls life may throw at you – the chance of it is always there so we must always be prepared.
Nothing on this blog should be considered personal actionable advice, research, or an invitation to buy or sell any securities. Consider all risks before investing, including the loss of your hard-earned money. Vee is an Investment Advisor for Warren Street Wealth Advisors, this blog reflects her personal views and not that of Warren Street.