Did you ever have a good dream suddenly take an awful turn — so awful you woke up and your heart was pounding?
That’s how recent bouts of volatility must have felt for those who grew complacent during the bull market’s mostly tranquil growth. When the elevator that had been rising so steadily started to bump and rock and drop at the end of January, it was a reminder that the market is — and always has been — unpredictable. And if you haven’t assessed where your portfolio stands when it comes to risk, now is the time to wake up and take a look.
That doesn’t mean you should panic. In fact, that’s the worst thing you could do. When investors get spooked, they make mistakes. Your goal should be to have a plan in place that keeps you on course even when the market does take a turn, whether it’s a correction, a crash or a bear market. Here are some steps you should take now:
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.
1. Be proactive.
Don’t wait for bad news and then start making moves. Look at your portfolio now to determine if it’s still a fit for where you are in your life. Sometimes investors pick a stock-bond mix and forget to adjust it as they get closer to retirement. Suddenly, the market drops and they realize — too late — that their risk isn’t as moderate or conservative as they thought. It’s important to look at your timeline, adjust your risk tolerance accordingly and rebalance regularly to maintain an appropriate asset allocation.
2. Have a safe harbor.
If you’re invested only in stocks and bonds and you’re worried about a market meltdown, consider further diversifying your portfolio. Look for something that isn’t correlated to the market (precious metals, for example), or talk to your adviser about safer investments (such as U.S. Treasuries) and put a portion of your savings there. That way, if the market is doing poorly, you’ll have other investments that are OK.
3. Keep your retirement income top of mind.
The quality of your life when you stop working will depend largely on the quality of your cash flow. Make income your priority in the planning process, and you’ll have a better shot at your nest egg lasting the duration of your retirement (which could be 20 or 30 years … or more). If you don’t have a pension through your employer, or if you’re concerned about a shortfall in guaranteed income, talk to a retirement professional about creating your own pension with a fixed index annuity or market-linked CD.
I see a lot of portfolios when I meet with people, but what I don’t see are a lot of plans that integrate risk management, income and inflation strategies, tax efficiency and long-term care and estate planning.
As I write this, the market appears to have stabilized. That’s a good thing, of course, but it isn’t a sign that you should fall back into a smug slumber. It actually makes this a great time to talk to your adviser about what you hope to accomplish — what makes your heart beat faster in a good way — and then to choreograph a plan that will help make it happen.
Kim Franke-Folstad contributed to this article.
Investment advisory services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Adviser. Educated Wealth Center and RWA are not affiliated.
No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. Consult your financial professional before making any investment decision. Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Any comments regarding safe and secure investments, and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Fixed insurance and annuity are not offered by Retirement Wealth Advisors.
-
Smart Strategies for Paying Your Child an AllowanceBy giving your kids money to spend and save, you’ll help them sharpen their financial skills at an early age.
-
The Mulligan Rule of Retirement — Seven Mistakes You Can FixUse the Mulligan Rule to undo these seven costly retirement errors. While you can’t go back in time, some retirement choices allow for a “correction shot.”
-
From Pets to Paintings: The Little Things That Can Cause Big Estate TroubleSentimental items might have little monetary value, but their disposition can cause hurt feelings. Talking about who wants what and labeling items can help.
-
The Clock Is Ticking: Take Advantage of These Retirement Tax Benefits While They LastRecent tax changes, including an extra $6,000 deduction for those 65 and older, present a golden opportunity for retirees to reduce their tax bills.
-
I'm a Financial Adviser: This Is Why Unmarried Same-Sex Couples Need an Estate PlanWhen illness or death occurs within an unmarried same-sex partnership, family members can step in and push the surviving partner out. An estate plan is vital.
-
A Financial Planner's Guide to a Stress-Free Adventure AbroadStart by looking at flight/accommodation costs, have a flexible schedule, seek out credit card rewards, prep for health issues and plan to cook your own food.
-
I'm a Financial Planner: This Is How Smart Women Can Plan for Financial Freedom Despite Life's CurveballsProactive planning and professional guidance can help to build your confidence and give you clarity when you're navigating major life transitions.
-
Parents and Caregivers: Don't Miss Your Roth Conversion WindowCaring for a child or parent can mean a drop in income and a lower tax bracket. Why not take advantage by moving money into a Roth account? Here's how it works.
-
Testing the Retirement Waters in Florida? A Partial Plunge May Negate Tax BreaksMost folks know Florida is a tax-friendly state, but they might not know that part-time residents may not qualify, as our cautionary tale shows.
-
Catch-Up Contributions for Higher Earners in 457(b) Plans: What You Need to KnowGovernment 457(b) plans are about to get more complex as new Roth catch-up requirements come into force. Here's how to prepare for the changes.
