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Protect your retirement against market volatility

Posted September 17, 2014 in Advice Column, Windsor Heights

As an investor, you’re well aware that, over the short term, the financial markets always move up and down. During your working years, you may feel that you have time to overcome this volatility. And you’d be basing these feelings on actual evidence: the longer the investment period, the greater the tendency of the markets to “smooth out” their performance. But what happens when you retire? Won’t you be more susceptible to market movements?

You may not be as vulnerable as you might think. In the first place, given our growing awareness of healthier lifestyles, you could easily spend two, or even three, decades in retirement — so your investment time frame isn’t necessarily going to be that compressed.

Nonetheless, it’s still true that time may well be a more important consideration to you during your retirement years, so you may want to be particularly vigilant about taking steps to help smooth out the effects of market volatility. Toward that end, here are a few suggestions:
    •    Allocate your investments among a variety of asset classes. Of course, proper asset allocation is a good investment move at any age, but when you’re retired, you want to be especially careful that you don’t “over-concentrate” your investment dollars among just a few assets.
    •    Choose investments that have demonstrated solid performance across many market cycles. As you’ve probably heard, “past performance is no guarantee of future results,” and this is true. When investing in stocks, choose those that have actual earnings and a track record of earnings growth.
    •    Don’t make emotional decisions. At various times during your retirement, you will witness some sharp drops in the market. Try to avoid overreacting to these downturns, which will probably just be normal market “corrections.”
    •    Don’t try to “time” the market. You may be tempted to “take advantage” of volatility by looking for opportunities to “buy low and sell high.” In theory, this is a fine idea but, unfortunately, no one can really predict market highs or lows.

It’s probably natural to get somewhat more apprehensive about market volatility during your retirement years. But taking the steps described above can help you navigate the sometimes-choppy waters of the financial world.

Information provided by Matt Kneifl, financial advisor, Edward Jones, 1100 73rd, Windsor Heights, 279-2219.





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