Sarote Pruksachat | time | Getty Images
The stock market got off to a difficult start this year. The S&P 500 Index is currently down more than 16% year-to-date through Monday’s close.
This has raised concerns among some investors. According to in the Allianz Life Quarterly Market Perceptions study, an online survey of over 1,000 adults conducted in March.
That’s an increase of almost 10 percentage points from the previous quarter, according to the survey. Additionally, more than half of respondents are worried about a stock market crash and 81% expect volatility to continue in the market this year.
“People don’t like financial uncertainty and that’s exactly what we’ve seen in the markets so far in 2022,” said Kelly LaVigne, vice president of consumer insights at Allianz. Life, in a press release.
Even amid market volatility and uncertainty, financial experts advise people, especially long-term investors, to keep investing in the stock market.
“Consistency in life and in investing is a real key to building wealth,” said Diahann Lassus, certified financial planner, managing director of Peapack Private Wealth Management in New Providence, New Jersey.
Recurring purchases by fixed sums
If you invest for your retirement in a 401(k) plan, you should continue to invest the same amount in the markets, or the average dollar cost of your investment.
“You have to be able to do that up and down, that’s literally how you dial,” said Douglas Boneparth, CFP, president of Bone Fide Wealth in New York. “That’s how you win the game.”
Continuing to buy when markets fall is also where investors can find opportunities for stocks poised to rise, he said.
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“You’re effectively buying things at a discount,” said Lee Baker, CFP, founder of Apex Financial Services in Atlanta, adding that having discipline in today’s market is like being a parent told you to eat your vegetables when you were a kid.
“Broccoli doesn’t taste so good when we’re younger, or carrots, but it’s good for you and in the long run it pays off in the form of strong bones,” he said. With investing, the payoff is a solid retirement account when you’re ready to stop working, he said.
Rebalance if necessary
If the market decline is keeping you up at night, now might be the time to rebalance the assets in your portfolio.
“If you end up with 80% equity and that really gives you an ulcer, then maybe it’s time to revisit that exposure,” Lassus said, adding that the markets may have already done the work to you.
She also suggested rotating money from winners – stocks that performed well – to stocks that lost value. While it can be difficult to sell your top performers, the discipline of selling high and buying low will serve you well over time.
Baker agreed, adding that for some investors the typical portfolio of 60% stocks and 40% bonds might no longer make sense.
“Maybe they really need to be 50-50 or 40-60,” Baker said.
Have cash reserves ready
Of course, a falling stock market can be particularly distressing for those who are retired or close to retirement.
To avoid selling assets at a loss to cover expenses, financial experts recommend having a solid cash emergency fund. This acts as a buffer so you can keep assets in the market to bounce back instead of selling when prices are falling.
“Even if you’re 60 or 70, with today’s life expectancy, you’re still investing for the long term to keep up with inflation,” Lassus said, adding that if you’re hoping to leave ‘money to your family long-term road, long-term investment is even more important.
Refocus on your project
One thing that can help investors disconnect from the daily cycle of volatile markets is to check their long-term financial plan and track where they are with their goals, Lassus said.
Remember that volatility is something to expect for long-term investors, and today’s turmoil comes after about two years of strong market returns.
“It’s much easier to invest money well and be disciplined when the markets are up,” Boneparth said. “It’s getting harder and harder to maintain that discipline when the going gets tough.”
At times like these, it’s extremely important to have a plan and be able to execute your strategy, he said.
“If you find yourself lost here, it’s probably due to the lack of a plan,” he said.
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Disclosure: NBCUniversal and Comcast Ventures are investors in tassels.