AP/Andre Penner
If you're feeling panicky, experts have some advice: Don't do anything.
With the spread of the coronavirus wreaking havoc on global markets, many investors have been left feeling powerless as stocks continue to slide. Those who have watched their retirement accounts dwindle by thousands (or more) overnight might even be getting itchy fingers, desperate to relocate the funds before they shrink even further.
It's ill-advised, but hardly surprising, given the volatility of the past week. As of March 12, every dollar of the $11.5 trillion the United States stock market had gained in value since Donald Trump's 2016 election had been erased. And with the slide showing no clear signs of stabilizing, even selling at a loss might feel more compelling than another day of uncertainty.
But let us add our voices to those of experts across the financial sector when we say: Don't. Seriously. As backward as it may sound, the best thing to do right now is absolutely nothing.
Don't move your money, don't cancel your retirement contributions, and most importantly, don't check your retirement account balances. There's nothing more demoralizing than realizing the funds you just contributed a few weeks ago have not only entirely evaporated, but are currently on sale for 10% off. (Trust me.)
At the end of the day, the only sure way for stocks to rebound is over time, and luckily, that's on your side - especially if you're a young investor.
Writing for Business Insider, financial planner Jeff Rose explains: "If you're even remotely young, please trust me that these blips on the radar are going to mean almost nothing in the long-term. Why? Because, when you invest for the long-term, you should fully expect to win some and lose some as the months and years tick by. The only key to winning in the long-term is making sure you stay in the game long enough to make the most of the days when everything goes your way."
It's proven advice, but we also understand that it's counterintuitive. As the nation braces for the full impact of the COVID-19 outbreak, medical experts have issued calls to action to protect your physical health, encouraging hand-washing, social distancing, and the cancellation of all nonessential events.
But when it comes to your financial health, and specifically the long term health of your retirement accounts, think of it more as a call to inaction. (Hey, if you can stop touching your face, you can probably stop checking your retirement accounts, too.)
Most investment strategies are designed to be effective whether the market is up or down. Dollar-cost averaging, for example, is a concept built to cushion investors against the volatility that's built into the very fabric of the market. And to protect us from our own irrational brains, that send us repeated, insistent signals to make big decisions during a crisis.
If you absolutely have to do something - and you can spare the capital - consider boosting your retirement contribution instead of cutting it.
As certified financial planner Lynn Ballou of EP Wealth Advisors explained, the movements of the market shouldn't be enough to shift our long-term goals. "The best thing to do at times like this is to stay focused on the long term and don't panic about the short term," she explained. "Instead, maybe be a bit opportunistic about the short term."
"Someone is going to make money during this market pullback. Don't be the one who sells low, enriching someone else at your expense. Instead, stay focused on your long-term goals, own high-quality assets, and get on with your life. Check in and review periodically so you don't miss anything important. But what matters most is not watching the market index bugs on the bottom right of your screen like a sport."
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
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