The 2008 Financial Crisis brought with it many uncertainties about the volatility of the stock market.
Many are seeking to reevaluate their investing strategies due to the perceived mistakes they made during the Great Recession.
Here are five 401K investing tips for today’s unstable market.
1. Pay less attention to the market’s ups and downs
When the stock market was falling rapidly, people were very pessimistic about making investments. When it started to pick back up, there was clamoring about how the market would rise again to new highs.
This is reflective of what occurs during every recession, big or small. There are market trends that everyone seems to follow.
For example, in the years leading up to 2008, Americans invested higher amounts in foreign assets. When the market when down, foreign assets fell more than did U.S. assets.
The market is always unpredictable, and nobody agrees on the course it will take.
2. Consider how much risk you are willing to take
Evaluate where you are financially and what makes you uncomfortable. If you have a long time to invest (and particularly if you are a young investor) consider investing more aggressively.
If you are getting ready to retire or if you expect to rely on your investments for income in a shorter period, be more cautious.
Your fears of the unstable market should not keep you awake at night.
3. Change your asset allocation every once in a while
If you set up a 401k with a target year 2020 in 1990, the percentage of bonds would have gone down and the percentage of stocks would have gone up.
This is reflective of the stock market’s good performance during the 90s, and the account would be riskier. It is important to stay informed.
Read a stock market newsletter on a regular basis to catch things that you or your financial planner would not see otherwise. Be your own advocate.
4. Never remove money from your account before you reach retirement
It is important to treat your 401k as what it is, your retirement savings. The penalties for removing money early are extensive.
5. Stick with it
No matter what anyone says, it is almost certain that the market will go up in the long term. That is what all investments are predicated upon.
Keep putting as much of your paycheck as possible into your 401k account. You are unlikely to regret it later.
The stock market is something I’ve always found to be really interesting. I like the advice to follow, not fight, the trend. It’s simple but it’s usually the simplest item that makes the biggest difference.