Manage market volatility

Woman in a kayak

  

  • Consider the big picture
  • Stay the course
  • Save consistently
  • Control what you can

It’s natural to feel anxious during market swings. Sometimes the waters get rough! Downturns have been a normal part of the market cycle. But, historically, every downturn has been followed by a recovery. You can see in this chart how the market bounced back after each of these down periods. That’s why it’s important to consider the big picture when saving for retirement. Focus on your goals, and remember that you’re in it for the long haul.

U.S. Market Recovery After Financial Crises

Cumulative return of balanced portfolio after various events

Cumulative return of balanced portfolio after various events chart

Past performance is no guarantee of future results. The return reflects the percentage change in the index level from the end of the month in which the event occurred to one month, six months, one year, three years, and five years after. This image illustrates the cumulative returns of a balanced (60% stock/40% bond) portfolio after six different U.S. financial crises. Stocks are represented by the Ibbotson® Large Company Stock Index. Bonds are represented by the 20-year U.S. government bond. This is for illustrative purposes only and is not indicative of any investment. An investment cannot be made directly in an index. For the U.S. savings and loan crisis, August 1989 was chosen because that’s the month the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 was signed into law. For Long-Term Capital Management, September 1998 was chosen because that’s the month the hedge fund was bailed out by various financial institutions. For the banking and credit crisis, October 2008 was chosen because that’s the month the Emergency Economic Stabilization Act was signed into law.  © Morningstar. All Rights Reserved.

Stock markets can go through periods of relative calm, followed by unpredictable ups and downs. That can send your emotions up and down, too...and cause you to feel seasick. It’s tempting to make investment changes to try to lessen the negative impacts of these cycles. But trying to time the market may cause you to miss out on upswings. It may be difficult, but try not to let your emotions dictate how or if you invest. Stay the course toward your long-term goals.

Keep emotions out of investing

Riding the waves of market cycles

Riding the waves of market cycles chart

Consistently saving in your retirement plan can help you keep emotion out of investing and allow you to use dollar cost averaging.1 When you invest regularly, you buy more shares when prices are low and fewer when they’re high—generally resulting in a lower average cost per share. Consistent saving also may help you benefit when the waters turn calm and the market recovers.

This chart demonstrates how staying the course over a period of intense market fluctuation can pay off. As you can see, a saver who stays invested may end up with a considerably higher balance after ten years than a saver who pulls out his or her money and reinvests one year later. And staying invested may result in approximately four times the accumulated assets as a saver who moves money out of the market and into cash.

The importance of staying invested

Ending wealth values after a market decline

Ending wealth values after a market decline chart

Past performance is no guarantee of future results. This is for illustrative purposes only and is not indicative of any investment. An investment cannot be made directly in an index. Recession data is from the National Bureau of Economic Research. The market is represented by the Ibbotson® Large Company Stock Index. Cash is represented by the 30-day U.S. Treasury bill. The data assumes reinvestment of income and does not account for taxes or transaction costs. ©Morningstar. All Rights Reserved.

1Dollar cost averaging is a strategy that helps you navigate market ups and downs by slowly and steadily easing into the market over time. It does not assure a profit and does not protect against loss in a declining market.

You can’t control the market. What can you control? Diversification. Investments in different asset classes (stocks, bonds, and cash/stable value) often perform differently. Diversifying—or spreading money across a variety of investments—can help you manage risk.1 If stock prices go down, bond prices may go up, and vice versa.

As this chart demonstrates, the long-term trend of the market has been up. Stocks may offer the potential for significant long-term gains, but a diversified portfolio may experience less volatility. Review your investment options and decide what asset mix best fits your goals as you sail toward retirement.

20-year portfolio performance

1999-2018

20-year portfolio performance chart

Past performance is no guarantee of future results. This is for illustrative purposes only and is not indicative of any investment. An investment cannot be made directly in an index. Stocks are represented by the Ibbotson® Large Company Stock Index. Bonds are represented by the five-year U.S. government bond.  ©Morningstar. All Rights Reserved.

1Neither asset allocation nor diversification can ensure a profit or protect against loss. Significant differences in risk exist among investment asset classes. Past performance is no guarantee of future results

Be prepared to manage inevitable market fluctuations.

Log in to your account and review your investments today! Speak to a retirement plan representative to learn more about managing market volatility.