I’m doing a lot of TV interviews on how to handle stock market volatility, depending on your goals and time in the market. Here are my thoughts…
All Investors Are Feeling the Pain
* Retirees (they’re understandably worried about making their money last)
* Baby Boomers near retirement (they’re rightfully concerned that a down market can crimp their standard of living — or worse: make them delay retirement)
* Stock market newbies (they bought in at the top of the market in 2021, or maybe late 2020, and now are seeing losses for the first time ever)
* Everyone else (looking at their statements this year and seeing the Dow off 15% and the the S&P 500 down nearly 20% … not fun! )
WHAT TO DO/LYNNETTE’S TIPS:
* Retirees: Tap other sources first
Instead of withdrawing investment funds, use pension assets, rental income, or Social Security checks
* Baby Boomers/Pre-retirees: Consider i-bonds
I-bonds are tied to inflation, can balance out stock market losses and safeguard some of your cash. I-bonds are virtually risk-free and paying 9.62% right now.
You can buy them from the federal government (See link below in comments)
Two catches with i-bonds:
1. There’s a $10,000 limit per person on how many i-bonds you can buy. (But a spouse can buy them, and so can a business or a trust, if you have one).
2. You have to keep the money tied up in the i-bond for 1 year.
* Stock market newbies: Dollar cost average
This means don’t throw big, lump sums into the market right now. Instead, spread out new investments and buy a fixed amount of diversified investments (like mutual funds or ETFs) on a monthly basis. Dollar cost averaging helps you get a lower price per share over time.
For EVERYONE else, follow these 3 tips:
1. Don’t panic and sell! (I KNOW IT’S HARD! But selling now is just locking in realized losses; right now they’re only paper losses).
2. Focus on asset allocation (Winning in the stock market isn’t about picking the next Google, Amazon or “hot stock” of the moment … 90% of portfolio performance is actually based on asset allocation — or the mix of stocks, bonds, cash or other investments you have).
3. Get diversified (Don’t have all your eggs in one basket. Make sure your investments are diversified geographically, across industries/sectors, according to market cap (large, small and middle size companies), and by investment style (i.e. have both growth and value-oriented investments).
Bottom line: if you’re younger, not retiring anytime soon, or don’t need your investment funds for an IMMEDIATE or short-term purpose, just ride out the current volatility.
Again, I realize it’s tough. But if you’re investing for the long haul, very often, the best course of action is: DO NOTHING!
