As you near retirement, you may become more anxious about market volatility. A big hit to your investment portfolio has the potential to impact or even postpone the retirement that you’ve worked so hard for. However, making knee-jerk financial decisions out of fear can make a bad situation even worse.
Thoughtful planning can go a long way to helping your portfolio weather all types of market conditions. We’re going to share four tips that may help you stress less about ongoing volatility as you approach retirement.
Create a financial plan and stick with it
In order to make your financial plan, first ask yourself three key questions: What are my retirement goals? What is my investment time frame? What is my risk tolerance? Your answers will help guide your financial plan.
As you build out your financial plan, think about strategies to downshift your risk as you near retirement. An aggressive growth strategy that includes short-term volatility may be right for a person at the start of their career, but it may not be appropriate for someone closer to retirement. It may be a good idea to select less-volatile investments for someone who plans to withdraw funds soon.
The best way to remember your plan—and stick with it—is to write it down. You’ll want to reference your plan from time to time to help make sure you’re staying on track
Make rational decisions, not emotional choices
When volatility comes calling, it’s crucial to resist the urge to act out of panic. During moments of stock market doom and gloom, you may feel tempted to withdraw from your investments. But the markets sometimes rebound much faster than you expect. You could shortchange your financial future by pulling out of the market too soon.
Avoid letting market ups and downs dictate your decision-making. Stay focused on your plan so you don’t inadvertently cheat yourself out of potential gains.
Maintain a diverse investment portfolio
One smart way to protect yourself against market volatility is to avoid putting all your eggs in one basket. For some investors, asset allocation is a good strategy.
With asset allocation, investors diversify their financial investments into a variety of asset types, such as stocks, bonds and money market funds.
Here are some benefits of asset allocation as a long-term strategy:
- Spreads market risk and reward so that your total portfolio neither bears the full brunt of poor performing asset types nor misses the opportunity for market gains of better performing asset types
- Frees investors from the burden of constantly adjusting their positions due to market fluctuations
- Helps investors maintain a level of control over their financial plan
Talk to a financial advisor about market volatility and your portfolio
It’s always a good idea to get an informed, second opinion. You may discover an opportunity or risk that you missed in your plan. It’s better to find out sooner than later so you can course correct and put yourself in a better position. Alternatively, you may get another vote of confidence that you’re on the right track.
When it comes to saving for your retirement, it’s normal to have anxiety about market volatility. Thinking about your financial future during unpredictable downturns can be stressful.
You don’t have to go it alone. A Bankers Life advisor is available to answer your questions, review your investment portfolio and help you create a financial plan that works for you—one that you can stick with through all the ups and downs. Call us to get started at (844) 553-9083.
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