Stressed about market volatility and want to change your investments? Do these 5 tasks instead

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The stock market is a roller coaster this week — and not everyone likes roller coasters, especially when they cause a drop in retirement account balances.

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The volatility is partly due to fears surrounding the Omicron version of COVID-19 and the US economy (the number of people applying for unemployment jumped from a 52-week low around Thanksgiving). On Thursday, the stock index rebounded slightly at the market’s open, but investors taking a closer look at their retirement accounts may have lost their balances less and less than a few days ago.

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Financial planners generally suggest that investors avoid checking their retirement accounts too often — especially when the market is jumpy — but this can be difficult for some individuals, especially if they are not comfortable investing. or are nearing their retirement years. Disadvantages – or at least overt ones – can make you less likely to retain retirement security.

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Here are some things you can do if you’re within a decade or so of retirement and can’t stomach the volatility:

Check Your Asset Allocation

During a recession isn’t usually the time to make changes to your investment portfolio, but if a slight downtrend is causing excessive stress, it may be a good time to examine your asset allocation and it may be a good time for you. How does risk align with tolerance?

Risk tolerance and risk appetite are two very different, but important concepts when building a portfolio. The first pertains to the risk that one is comfortable holding in their account – for example, someone who goes to a Las Vegas casino and doesn’t care about big losses on the blackjack table has a high risk tolerance – while the risk potential is high. Tied to how much risk a portfolio can or should allow to meet the individual’s goals. The two aren’t always in sync, and those who are concerned about their portfolios should speak to a financial planner who can help adjust the portfolio over a reasonable amount of time, or learn to accept fluctuations. can find ways.

“Everyone is different and good investment strategies need to account for this,” said Howard Pressman, a certified financial planner and partner at EBW Financial Planning. “The past 10 years or so has drawn investors into a false sense of comfort and many people who are not well suited to aggressive investment portfolios are, in fact, invested in this way.”

Consider the Bucket Strategy

A financial planner takes into account all income streams expected in retirement, and implements a strategy for investing that also includes risk tolerance. Michelle Gesner, a certified financial planner and founder, said, “For example, we figure out how much of a client’s projected income, such as Social Security and pension income, is their expense for both fixed and discretionary expenses, and then calculate the same amount.” Invest accordingly.” Gesner Wealth Strategies.

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Then she breaks it down further: Short-term living expenses, such as those over the next two years, are the most conservative investment strategy of all assets; Living expenses between 3 and 5 years have a “more lenient strategy” and everything else is more aggressive, which will help meet long-term needs.

“When markets fall, our clients are not worried, because they know that markets recover in two to three years (or less) and have money that is conservatively invested that they can wait for. Can use while doing,” she said. “This strategy helps our customers avoid making mistakes because of unnecessary worry.”

Some advisors also suggest that one or two years of living expenses be in cash, which is easily accessible and allows the investment to remain completely untouched during times of volatility. Other advisors use more than three buckets when investing retirement assets.

remove yourself from easy reach

Most retirement investors, especially those who don’t need to access the funds immediately, should avoid checking their accounts frequently. Make it as difficult as possible to check in all the time, said Paul Fenner, a certified financial planner and founder of Tamma Capital. “Remove apps from their phones, remove websites from their favourites,” he said. “Anything that takes an extra step or two to access their accounts can make individuals feel like it’s not worth the effort.”

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Plan when to check your accounts

Changing attitudes can also help those concerned about their retirement savings during a recession.

“Some of the stress comes from looking at things with the wrong level of ‘zoom,'” said Jennifer Grant, a certified financial planner at Perryman Financial Advisory. “When you invest in the market, are you looking at it on a daily, weekly or monthly time frame? When you make a plan, do you review it on a weekly, monthly or yearly time frame?” She said, “If you check how often a goal should match the length of time it takes to reach that goal,” she said. When planning a vacation, you need to review your budget daily or weekly,” Grant said. “When you’re planning for retirement, which will start when you’re 65 and past 35. , so it requires a different zoom level.”

keep an eye on the loss

It’s unpleasant to see any loss while logging in, but assess what that loss means in the bigger picture. “Losing $10,000 in a month sounds like a lot of money, unless you have a portfolio of $1 million and then it’s 1%. Will 1% cause you not to retire on time?” Grant said. “I think this is where people nearing retirement really feel the pain. Their accounts are close to the maximum they will ever be before they start taking money from them to live on.”

Go into investing and volatility with reasonable expectations and guidelines for when to review a portfolio.

Investors can associate the loss with a large purchase, such as the loss of a certain amount they could have spent on a new car.

“They could have made that much money, but it’s not that memorable,” Grant said. “During their adult lives, they know how much effort it takes to buy a new car and it’s hard to think they can lose it quickly. That’s where perspective and zoom levels come in. Huh.”

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