Seriously, markets go up and down, always have and always will and just about no one knows when or how far or for how long.
So, what to do?
Simple, allocate your investments based on 🤑 your age, 🤑 how long before you will need to use those assets and 🤑 how much of those assets you will use each year upon starting.
- If you are many years from retirement, allocating for growth, meaning mostly or all stocks is your best bet. You have many years to recover from a decline and to take advantage of buy opportunities when the market tumbles
- As you age and are say, within fifteen years of using assets in retirement it’s time to start hedging your bets modestly. That’s because early retirement may be foisted upon you and you have less time to recover, but you still need growth
- In retirement some, but less, growth is desirable, while the ability to generate income becomes more important. REMEMBER, even in retirement you are not going to use all those assets at once, but over many years so a market downturn may be a tad scary, but not a disaster. The press cries that people were wiped out or lost their retirement funds is bunk, unless the individual panicked and locked in their losses by getting out of stocks at the low point. Many people set their investment horizon as the retirement date. That’s a mistake. For most there are 20-30 more years.
Following is my 401k asset allocation ten years into retirement. Given these are not my only investments and I have a pension as well, this may be conservative. However, the point is that if there is a stock market correction only about half my account is at significant risk of a decline.
On the other hand, placing all or the great majority of the account in stable value, would not at 1.52% return provide sufficient income to allow withdrawals for most people and not rapidly deplete the account.
The key point is you have to think about this stuff. You have to think long term, be realistic with your goals and do your best to stay the course and not panic. Easier said than done perhaps, but absolutely essential.