How Will the Election Impact My Retirement Account?
This past weekend, a client emailed me asking if there was a cash investment available in their retirement plan. They were concerned that there would be a large market correction shortly after taking office if “Candidate X” was elected.
I responded by explaining which Plan investments were considered to be the most conservative, but followed that up with a disclaimer:
“I just wanted to remind you that a retirement plan is designed for a long-term time horizon. There will periodically be short-term market events that result in a drop or correction, or can result in a significant “run up”. It is important to remember that over long periods of time, things tend to even out. Most studies will show you that trying to time or beat the market with a tactical investment strategy is considered an aggressive move and, more often than not, works against investors. Keep in mind that when you try to time the market, you have to be right twice: when to get out and when to get back in. Market sell offs and run ups usually happen extremely quick, and if you miss out on those, it can potentially cost thousands in retirement savings to the investor. This is why we preach diversification and a long-term, buy and hold approach that is in line with your risk tolerance.”
Whether it’s the election, Brexit, terrorism, or any other news headline you may see, our message at DirectAdvisors remains the same: don’t panic, remain diversified, and keep the long-term in mind with your retirement investments. For additional illustrations on this topic, please take a look at my three blog posts below from earlier this year.
- “How Much Did 401k’s Lose to ‘Brexit’?”
- “Volatility Continues in 1Q 2016”
- “Recent Volatility in the Financial Markets – Don’t Panic!”