- November 2008 > Retirement Corner
Market volatility shot up to its highest level since 2002 as investors weighed the impact of ongoing financial and economic events. So what should you do now? The reality is that no investment is sheltered completely from losses. But there are prudent action steps you can consider:
Broad diversification can help ensure that your exposure to any individual stock in the news is limited. However, the benefits of diversification are often not obvious over very short periods, particularly in bear markets when different investments can all appear to decline together.
Diversification means many things, but most experts agree that allocation is at the top of the list. That means finding the right mix that makes sense for your risk tolerance, time horizon, and liquidity needs.
Particularly with the recent sharp price movements, now may be a good time to check your asset allocation across your UTSaver voluntary and your Optional Retirement Program accounts. Are you diversified? Is your asset allocation where you've decided it should be?
With all of these action steps, it's important to beware of some of the many psychological traps that even experienced investors can fall prey to. The first is a human tendency to be more comfortable taking risks in bull (market in which prices are rising and expected to continue to rise) than bear (downturn of 20% or more) markets. This leads to a danger of buying and selling, or increasing or decreasing your portfolio risk, at the wrong times. A second hazard is a reluctance to rebalance. Even investment professionals will tell you that rebalancing for their own accounts can be emotionally difficult. But since asset classes that lagged in one part of a cycle can lead in the next, it's important to consider rebalancing to maintain your appropriate mix.
The UTRetirement Program Providers have trained professionals available to speak with you at any time to assist you with your retirement savings needs. Donít be afraid to ask them for help, even if all you need is a calm, impartial voice reminding you to stay the course.
Source: What Should You Do Now: http://personal.fidelity.com/products/publications/
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