Getting the most out of your retirement savings when the market is bearing down

It is exciting as an investor to see your retirement portfolio grow when the market is growing regularly during a bull period. However, bull markets cannot last forever. Eventually, something like COVID-19 comes along and shakes things up, and the market bears down. As of September 2020, the market looks more stable than it did the late winter and early spring, but still, bear periods like this frighten investors, and you may be wondering how you should prepare for the next time the market turns downward.

Everyone’s bear market strategy looks different according to their investments, their wealth and their risk tolerance. However, there are some general truths you should keep in mind when it comes to adjusting your retirement savings to get through bear markets.

Diversify your portfolio

Your retirement savings should be in a diversified portfolio. What we mean by this is you should not have all or most of your savings riding on the fate of one or two asset classes. Consider investing into stocks (large and small, domestic and foreign), bonds, real estate, money market accounts, certificates of deposit (CDs), Treasury securities and more. 

Some of these options might not be as exciting or have the high return potential of stocks, but they are less risky and can help you keep your portfolio stable during a bear market. Once you have set your asset allocation, be sure to rebalance from time to time, as the assets will not move in tandem.

Never panic

One of the worst mistakes you can make when the market bears down is to sell out of panic. Do not let your emotions get the best of you. If you have a well-defined asset allocation, you need to stay the course. If you don’t, not only do you have to make a decision about getting out, but you also have to make a decision about getting back into the market. Being right twice on a consistent basis is not possible. It is the time you are in the market that makes a difference. Consider that if you sold in the spring and stayed out of the market through September 2020 you made your losses permanent and missed the entire recovery. 

In other words, panic selling during a bear market is generally more harmful than helpful. Instead, take a deep breath and consider how to make the most out of this situation rather than trying to run or hide from it. One way to do this is to rebalance your portfolio. Take this spring as an example. Stocks went down and bonds went up. Your asset allocation is out of balance. So, sell some of what went up (bonds) and buy what went down (stocks). In short, you are selling high and buying low. It may feel counterintuitive at the time, but it is the right thing to do over time.

Think of this like buying a product that you have been wanting for a long time when it is on sale. Eventually, it will not be on sale and will return to full price. Your expedience in purchasing it at the right time gets you what you want while saving you money.

Talk to a ProVise CFP® professional about managing your retirement account during a bear market

Imagine if in a race, a runner sees that she is behind and decides to give up. This would be a terrible strategy for a race, right? Well, it is the same with your retirement investments. When the market is bearing down, do not be like the racer who gives up. Be like the racer who sees that she needs to catch up and charges ahead.

Managing your retirement investments can feel overwhelming when you are not well versed in the financial landscape or do not have the spare time to focus on it. That is why you can count on CERTIFIED FINANCIAL PLANNER™ professionals like those at ProVise Management Group to help you make the right decisions.

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about saving for retirement? Contact ProVise today to schedule a complimentary consultation.