There are many things about our financial future that we can control, including our budgets, our spending habits and how we save. According to a recent survey, 80 percent of Americans say they feel in control of their financial futures. But no matter how in control we feel, even the smartest, savviest investor can’t control the market.
A key to weathering market volatility is staying invested for the long haul. The market will have its ups and downs, but using these tips can help you stay the course, so you can live the life you envision in retirement.
Don’t withdraw. With market downturns you may be tempted to move money out of your plans or withdraw assets. If you take money out of your plan, you’re missing out on compounded interest, as well as any gains that the market makes while that money isn’t invested. Making decisions based on what the market is doing short-term can negatively impact your long-term goals. Plus, there are tax implications to consider surrounding a withdrawal, and you could be subject to penalties and fees if you don’t pay back the loan.
Be realistic about your risk tolerance and goals. Think about what your retirement will look like. Do you want to continue to work into your retirement, or plan on having a part-time job? Would you rather focus your time on traveling, pursing a new hobby or volunteering? Then consider talking to a financial professional to understand and establish the investment strategy you will need to accomplish those goals. There are many risk tolerance questionnaires available online which, along with your financial professional, can help you understand your personal risk tolerance. A recent MOOD of America study commissioned on behalf of Lincoln Finanical Group showed that more than half of Americans believe that meeting with a financial professional is very important when it comes to taking charge of their financial futures.
Diversify your portfolio. A financial professional can help you understand the type of diversified portfolio that is right for you, based on your age, risk tolerance and goals. By diversifying among and within asset classes, you can help balance risk and return. As you get closer to retirement, you may want to move away from return-based to more income-based investments.
Rebalance to manage risk. While your risk tolerance may change as your get older and will affect how you allocate your assets, changes in the market can also change your asset allocation. Over time, your stocks and bonds may grow at different rates, which can alter your investment plan. By rebalancing your portfolio, you can get back to your target allocation. You also may be able to take advantage of auto-rebalancing if your plan offers it, or you may be able to invest in a target-date fund, which may automatically rebalance to ensure your allocation stays aligned with your goals.
Dealing with a volatile market isn’t easy, and leaving your money in the market as it fluctuates can feel difficult. But with these tips, the advice of your financial professional and a solid investment strategy, you can ride out the dips in the market and have the retirement you envision.
Results for the 2015 MOOD (Measuring Optimism, Outlook and Direction) of America poll are based on a national survey conducted by Whitman Insight Strategies (WINS) on behalf of Lincoln Financial Group from March 31 to April 9, 2015 among 2,273 adults 18 years of age and older across the United States. The sample was weighted to reflect the proportion of adults 18 years of age or older by gender, age, region, race and Hispanic ethnicity based on data from the U.S. Census Bureau. The margin of error is plus or minus 1.9 percent at the 95 percent confidence interval for the entire sample.
More from U.S. News
10 Investing Tips for the Rest of 2015
7 Facts Investors Should Know About Insider Trading
10 Reasons New Investors Should Enter the Market
To Weather Market Volatility, Stay Invested for the Long Haul originally appeared on usnews.com
