The stock market has the tendency to ebb and flow as news unfolds. If bad news hits the airwaves, stocks can take a hit, but this is not the time to make significant changes. Retirement accounts, such as 401(K)s, need to be monitored, but do so with the long-term goal in mind. Depending on what stage you are at in life, you might need to take a little action, and there are certain things that are not advisable for anyone to do.
When you see the stock market going down, it is not the time to stop contributing to 401(K)s and other retirement vehicles. In fact, it could turn out to be the best time to buy stocks for the long haul. Stocks that are traditionally very high might become a great deal during this downtime. Eventually, the stock will rebound to its former high, and you acquired it at a great price because you stayed in.
If you are nearing the Golden Years, take a look at how you are splitting your money up. Look at your 401(K), and determine if you have a balance between stocks and bonds. Stocks tend to be more volatile, so if you are nearing retirement, consider putting more of your funds in fixed options, such as bonds. On the other hand, if you are just building your portfolio, and you will not be retiring for many years. Putting more inside stocks and higher returning products may be a good move.
You do not have to move your funds inside a 401(K) continually. Doing this might stress you out, and it may not give you any more return on your investment than occasionally monitoring the fund’s progress. Trying to guess what the market will do next is not practical and not possible. The best approach is to understand that there will be ups and downs, but stay focused on adding to the bottom line with contributions and diversification.
An action that almost no one should do is withdrawal money out of a 401(K) early. Pulling any funds out will cause a cascade of financial penalties and taxes. When you put money into a 401(K), you are not taxed. If you take it out early, the government will want the taxes you should have paid on it plus more. Taking money out of the market out of fear will not help you build a nest egg or a brighter future.