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Don’t sell 401(k) investments in choppy markets.  Try these tips

Days of record market losses can spur 401(k) investors to action.

Yet most experts warn against this.

The reason: Days when the markets are down tend to be closely followed by days when the market is up. If you sell and shelter now, you may miss the potential.

“The reward doesn’t come without the risk,” said Sri Reddy, senior vice president of retirement income and solutions at Principal Financial Group.

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Once you’ve identified a level of volatility you’re comfortable with, experts generally say you should try to stay the course even during choppy market activity.

“It’s especially important not to panic,” said Rita Assaf, vice president of retirement leadership at Fidelity Investments. “Stick to your long-term plan.”

If you’re still tempted to take action, there are some steps you can take that experts say will position you for future growth.

Review your allowances

It is important to have a healthy mix of stocks and bonds.

Ideally, your diversified investment strategy will expose you to different areas of the market to help manage your overall portfolio risk, Assaf said. This includes US small cap, large cap and international stocks, as well as investment grade bonds.

Since equities have typically rallied for an extended period, it’s also important to check that your portfolio hasn’t drifted into a higher equity allocation than you originally planned, Assaf said.

“You want to make sure your portfolio is balanced and your equity allocation is in line with your goals,” Assaf said.

Try to have enough money aside

Having enough cash set aside for your short-term needs will allow you to better prepare for market shocks.

If you’re close to retirement or already retired, make sure you have enough cash to cover one to two years of your spending needs, Reddy advised.

“What you don’t want to do is have a market correction and then you start taking money out of the market,” he said.

Investors of all ages should have three to six months of cash to cover essential expenses set aside in an emergency fund, Assaf said.

Resist the urge to verify your account

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Amid dramatic market headlines, some investors will log into their accounts two to three times a day to check their money, Reddy said.

But keep in mind that the balances you see probably haven’t been updated to reflect real-time activity. Since 401(k) plans are made up of mutual funds, latest balances are usually not available until the end of the business day.

Most people tend to underperform broader markets because their timing is always off, Reddy said.

“You can never predict big up moves, big down moves, or intraday volatility,” he said.

Seek professional advice

Having a long-term plan tailored to your needs and goals makes it easier to stay on track.

To make sure you’re on the right track, it’s best to consult a professional financial adviser who can help you prepare for all scenarios, Assaf said.


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