How To Survive A Market Downturn In Retirement

The Perfect Storm: How To Survive A Market Downturn In Retirement

Oceans are both beautiful and frightening.  A beach vacation is rejuvenating but ocean storms can be powerful and dangerous.  Financial markets also have two sides. One side gives you wonderful long-term returns and the other inflicts terrifying short-term market selloffs.

It is no secret that the stock market is volatile and highly subject to shifts and changes. A stock market correction or bear market can be a stressful time, but there is a way through it and there are strategies for making the most out of your investments.  Proper investment planning must account for these periodically difficult times in markets.

Take a deep breath, and let’s see how long you’ll last under water.

Testing the Waters

Investing in the stock market is a great way to invest your long-term retirement savings.   When you embark on the journey of investing, it is important to understand that there will be many ebbs and flows along the way.

A market downturn is always troublesome, but the most important thing is not to panic. When something goes wrong, many investors make quick, irrational decisions motivated by fear.  

Surviving a market correction or bear market is much like holding your breath underwater. When you try to hold your breath underwater, excess movement makes it much more difficult.  You usually end up using your energy quicker, and forcing yourself to come up sooner. But, if you stay still and calm while you are underwater, you conserve energy and are able to hold your breath longer.

Conserve your energy when the stock market takes a downturn. You don’t have to immediately sell off your assets.  You can take some time to assess your portfolio and make a calm and collected decision on how to move forward.

If you are losing sleep due to the volatility in your retirement portfolio, you have probably misjudged your risk tolerance. Now is a good time to reevaluate your risk tolerance. You can do this by asking yourself the following questions:

  • Has my risk tolerance altered since retirement?
  • Have I adjusted my investments according to my risk tolerance?
  • Is my portfolio reflective of my interests?

Talking through these questions with your financial advisor will help you make logical choices concerning your assets and plan the most effective method for moving forward.  

Dive Deeper

When you are stuck in a riptide you don’t want to swim against it, rather you want to swim perpendicular to the rip in order to break free. You can use this strategy for dealing with a market downturn as well.

When the market goes down, instead of fighting against it and selling your shares, it is usually best to stay put, or even better to buy more shares with long-term investment funds.

Wait, did I just say buy more shares when the market is down?

Yes. When the market goes down, it eventually goes up again meaning the new stocks you buy will appreciate in value. You might accomplish this over the long-term by periodically rebalancing your portfolio back to an established asset allocation that matches your risk tolerance.

Flag Down a Lifeguard

When the water is dangerous, a lifeguard comes to your rescue. In terms of your retirement investment management, your lifeguard is your financial advisor. Keeping open dialogue with your advisor is critical for maintaining a calm demeanor during a market downturn.

Your advisor will be able to help you create the best plan for you and your investments. Talk with them about your concerns and you both will be able to assess your portfolio and find the right areas to make changes. It is always important to have someone on your side, especially in times of crisis. Your financial advisor will be there for you when the market is doing well, and maybe more importantly, when it is not.

Give us a call and we can talk about your goals for your investment portfolio and keep you comfortably above water.

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