We’re sure you've heard that the bear market has returned in full force. Like most people, this is probably making you feel uneasy about your investments. While feeling a little nervous when the market takes such a dramatic turn is normal, it's important to remember that this kind of volatility is normal and even healthy in the long run.
The retirement financial planners at Global View are here to remind you of this as your ‘advocate advisors.’
In fact, if we didn't have these kinds of fluctuations, then there would be no opportunity for growth or change! With that said, it's also important not to panic during times like these because doing so can have detrimental effects on your finances (and sanity).
So, as we navigate through one of the most challenging economic periods in recent memory, this article will cover these tips for prepping your 401(k) for survival:
- Review your 401(k) portfolio and make changes if and as necessary
- Diversify your investments across different asset classes
- Hedge your bets by investing in both stocks and bonds
- Stay the course and don’t sell your investments during a market downturn
- Don't forget about fees – make sure you're not paying more than you need to
Review your 401(k) portfolio and make changes if necessary
It’s wise to review your 401(k) portfolio and make changes as needed. You may not need to make changes if you have a good 401(k) plan. If you doubt the effectiveness of your 401(k) plan, consider moving your money with the help of our advocate advisors.
Diversify your investments across different asset classes
Diversification is a method of investing that can help you reduce risk and achieve your financial goals. You should invest in different asset classes such as stocks, bonds, cash, real estate, alternative investments, etc. Diversifying across asset classes is important because it helps you avoid losses in any one area of the market by spreading out your investments into different areas.
How to invest in a bear market?
A bear market refers to a period where prices go down for an extended time due to negative economic conditions or events affecting confidence levels within investors (like a recession).
People often panic when volatility is elevated, and markets plummet rapidly. This can lead to investors selling and hurting their long-term goals for retirement.
Hedge your bets by investing in both stocks and bonds
Learn how to find a fiduciary financial planner to get started. A fiduciary is upheld to act in your best interest and has a duty of loyalty because they are accountable for their advice (which also means they can't sell products that conflict with what's best for their clients). Our team of devoted investment advisors in Greenville, SC, always provides financial and investment advice with your interest first.
If you're looking only at stocks right now, some options will keep your money safe—even if it doesn't grow much during the bear market. Index funds offer low-cost ways to invest in large swaths of the market without paying high fees (and they're less risky than individual stocks). You'll need an IRA account (or 401(k)) set up if you want access to these funds.
Of course, the diversification in your investment portfolio will depend highly on your risk tolerance and time horizon, so don’t do this alone.
Stay the course – don't panic and sell your investments during a market downturn
The market will go up and down, so don't panic if your investments drop in value. Instead, be prepared to watch your losses and remain disciplined when deciding whether or not to sell. Don't let emotions drive your investment decisions; rather, ensure that you have a solid reason to sell an asset (or not buy one) before committing yourself.
Fundamentals and valuations matter most. Good companies may often experience the downturn with overvalued and lower quality companies. This creates opportunities. When the recovery happens, these companies should experience strong rebounds. So, buying quality companies in the dips will create strong investment returns over the long term.
Don't forget about fees – make sure you're not paying more than you need to
Now that you know the difference between a fiduciary financial planner and a non-fiduciary planner, It’s important to know the difference between a fee-only financial advisor and a commission-based financial advisor. Just as the name implies, fee-only does not get a commission, whereas the commission-based advisor does, so be careful when selecting your financial ally. They may not have your best interest in mind.
We are a fee-only, fiduciary financial advisory firm here at Global View, located in Columbia and Greenville, South Carolina. To be transparent, we receive zero commissions in any form (including insurance commissions). You pay us fees for ongoing investment advisory services instead of a one-time or annual fee… of course, that is up to you.
Schedule regular reviews of your 401(k) to ensure it's still on track
Schedule regular reviews with your financial advisor if you're not sure how to manage your retirement savings or how to make sure that it's on track for the future, especially during high inflation. They'll be able to help ensure that you're getting the best possible returns from your 401(k) and help you avoid paying more than necessary in fees.
Don't let the bear market twist your judgment
While the bear market has been scary, it’s important not to let your emotions get the best of you. This is where a fee-only investment advisor can help. We will provide clarity and support as you navigate this difficult time.
With our guidance, you can make decisions that are in your best interest and stay calm about what lies ahead for your 401(k). We hope this has helped you understand how to prep your 401(k) for the bear market and avoid making hasty decisions.
Remember, in the end; all investments are risky – there's no way around that. But if you're willing to take a few steps (and spend some money) on diversification, you can ensure that at least some of your money will be safe even through an economic downturn or recession.
Get into the right mindset with Global View
- Don't panic. Your 401(k) is an investment, not a savings account. It's important to remember that the investments in your 401(k) won't just disappear when a market crash occurs; they'll just be worth less than they were before. So don't sell everything just because the market has taken a dip; you'll only lose money on those investments in the long run.
- Don't make any rash decisions about your retirement plan based on what you hear in the news or from friends and family who aren't as informed about investing as you are—they might have good intentions but could end up hurting you more than helping you with their advice!
- Stay committed to making regular contributions (a minimum of 10% of income), even if it becomes more difficult when markets are volatile like this one is right now.
It’s time to rely on CERTIFIED FINANCIAL PLANNERS at Global View, located in Greenville, SC, for clarity and support.
Download your complimentary eBook as the world is still attempting to establish a new normal.