The current market bull run is the second longest on record. To become the longest ever, this rally would need to continue to 2021. It is easy to be uneasy about where we were in March 2008 and where we are today—and anybody who suggests they know how this will play out is kidding you and themselves. A powerful mantra to always remember is "nobody knows," not even the so-called experts.
With that said, while we don't know when the next bear market will happen nor how severe it will be, we do know it will happen. How do you prepare yourself? Here are a few tips beyond the obvious age-appropriate asset-allocation guidelines:
The next crisis is an opportunity.
If you are in your working years, a downturn can be a window to buy stocks "on sale." If you view every paycheck deferral or systematic investment as buying a great deal on stocks, the pain you feel in the existing portfolio may ease. Moreover, investors of all ages may find the gumption to shift existing funds outside of the stock market into it if the "opportunity" mindset overcomes the "crisis" emotion.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
This is much easier said than done, because money is very emotional. Managing these emotions is part of our collective challenge.
Managed money, allocation funds and target retirement date funds have a pitfall.
Let's say you are retired and your entire portfolio is in one of these increasingly popular investment devices with a built-in 60/40 allocation. You are using this portfolio to replace your paycheck and fund your retirement. For many years, you've been able to withdraw money—and the portfolio has grown. You have benefited mightily from what advisers call the "sequence of returns." Retire during a bull market, and your early years of retirement seem easy. But what should you do when the market turns down by 20%, 30% or even 60%? Remember, peak to trough, the S&P 500 lost 49% in 2000-2002 and 57% in 2007-2009.
Retirees using these types of accounts to replace their paychecks face a dilemma: The fixed-income/cash components of those accounts are built in. The investor can't contact the custodian of the fund and ask them to take the distribution from the fixed sleeve. The stock component of the distribution and its down-market loss has been locked in. Make sure you balance your portfolio with three to five years of protected retirement accounts you can cherry pick from for distributions in a down market. This allows the stock components to heal.
Run your portfolio through a "what-if."
How would your portfolio have done in 2000-2002 or 2007-2009? This can be both compelling and sobering. Ask yourself how you would react when that happens again. If panic comes to mind, you have some work to do, either with your portfolio and/or your mindset. What are your Plan B and Plan C scenarios for when it happens?
Capitalism isn't always pretty. Considering that, navigating retirement requires diligence, education and even worst-case scenario planning. Saving and making wise investments impact us daily, both on an emotional and financial level.
-
A 'Fast, Fair and Friendly' Fail: Farmers Irks Customers With Its Handling of a Data BreachFarmers Insurance is facing negative attention and lawsuits because of a three-month delay in notifying 1.1 million policyholders about a data breach. Here's what you can do if you're affected.
-
Serving the HNW Market: How Financial Advisers Can Break Through and Deliver Lasting ValueFinancial advisers have a significant opportunity to serve high-net-worth clients by elevating their capabilities, delivering comprehensive planning, building diverse teams and prioritizing family wealth education.
-
A 'Fast, Fair and Friendly' Fail: Farmers Irks Customers With Its Handling of a Data Breach
Farmers Insurance is facing negative attention and lawsuits because of a three-month delay in notifying 1.1 million policyholders about a data breach. Here's what you can do if you're affected.
-
Serving the HNW Market: How Financial Advisers Can Break Through and Deliver Lasting Value
Financial advisers have a significant opportunity to serve high-net-worth clients by elevating their capabilities, delivering comprehensive planning, building diverse teams and prioritizing family wealth education.
-
Don't Just Sell, Connect: How Financial Advisers Can Ignite Their Sales GrowthAvoid complacency and embrace small, consistent improvements to optimize your sales process and results.
-
Are You a Small Business Owner Buckling Under Economic Pressure? Here's How You Can CopeSignificant emotional and financial challenges, including tariff worries, are piling up on small business leaders. Here's how leaders can develop more healthy coping strategies and systems of support.
-
To Raise Prices or Not to Raise Prices: Tariff Tips for Small BusinessesSmall businesses are making critical decisions. Should they pass on higher costs due to tariffs, or would that only cost them more in lost customers?
-
Five Retirement Planning Traps You Can't Afford to Fall Into, From a Wealth AdviserTo help ensure you reach your savings goals and enjoy financial security in your golden years, be aware of these common pitfalls. The key is to be proactive, informed and flexible.
-
Your 401(k) Can Now Include Alternative Assets, But Should It? A Financial Adviser Weighs InMany employer-sponsored plans offer limited investment options, which can stunt growth. But participants considering alternatives might need some sound advice to get the most from their accounts.
-
Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very LikelyConventional wisdom dictates that you save in a 401(k) now and pay taxes later, but turning that rule on its head could leave you far better off. A financial planner explains why.
