401K Volatility in a Pandemic: What to Do?

Virtually all of us have in some way been affected by the coronavirus (COVID-19). The material changes to our lives that may include working from home, canceled business trips and even forced time-off are very real. Acknowledging that coronavirus, and the sharp drop in oil prices, is temporarily affecting our economy is undeniable, but what is a prudent investor to do? Should you be taking any action?

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Three key points highlight our thinking at this stage.

  1. Recognize that this situation is not completely unique. There have been several large-scale viral outbreaks that have impacted global markets in recent history. In each case, the economy and market eventually marched on. The preventative measures governments and businesses are taking should be viewed as a desire to keep this episode relatively contained and short-lived. These temporary disruptions are designed for long term success. The economy, and our working cadence, will return to normalcy. As this occurs the volatility in the markets should subside. Do not let temporary disruptions deter you from long term investment success.
  2. The prudent course of action historically has been to stay the course. In the past, participants who continued to contribute to their 401k and maintained their long- term strategic allocations benefited from one of the longest bull markets in history. The events of 9/11 and the Great Recession did not cripple us or our economy, COVID-19 will not either. There is a reason this “stay the course” advice is given over and over and over. It generally works. We see no reason to believe this time will be different.
  3. These types of pullbacks should be viewed as a boon! How can one “buy low” if there are no lows. If you are 10+ years from retirement, think of this as a possible opportunity. This type of market environment can create heightened anxiety, notably for those ten years or less from retirement. However, emotional/reactionary decisions can be even more detrimental when you are close to the finish line. Please consider giving us a call before making material portfolio changes, especially if you are in this later stage of your career. We can help you determine if that would be an appropriate course of action or not.

Markets sell-off and markets rally, that is part of being an investor. This sell-off is driven by a microscopic virus. The next one, nobody knows. Past performance is not a guarantee of future results but history demonstrates investors have been rewarded overtime for staying invested.

Guest post contributed by Michael Esselman, CFA Director of Investments
401K Advisors Intermountain
Note: Past Performance is not a guarantee of future results.

John Farnsworth

Author John Farnsworth

John learned at an early age the value of hard work, forming his first company before his 18th birthday. He co-founded Stratus.hr (originally “Innovative Staffing”) in 1999 and has an established reputation for his expertise, work ethic, and love for traveling.

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