Originally published: December 12, 2024
Updated: April 9, 2025
With new tariffs shaking up the market, investors may be worried about their retirement savings. Market volatility can cause even the most experienced investors to feel anxious, especially when it comes to their 401(k) accounts. Sudden downturns and unexpected swings in the stock market can cause you to question your investment strategy and move to more conservative investments. However, when it comes to investing in retirement plans, it is important to maintain a long-term perspective.
Maintain a Long-Term Perspective
As difficult as it may be, it is important to avoid emotional reactions to short-term market swings and make sure you are sticking to your long-term investment plans. It is key to base your investing decisions on your overall risk tolerance and investment objectives. Investing in a 401(k) plan is a long-term investment designed for replacing your income once you are no longer working, often this can be decades down the road. When markets drop it is easy to want to sell more aggressive investments like stocks in favor of more conservative options, but selling during these times is often counterproductive. By selling your investments when markets are down you lock in your losses, which makes it more difficult to recover when markets eventually rebound.
When investing, it is important to understand that while downturns are unsettling, the stock market has shown consistent growth over time. While it can be stressful watching your portfolio lose value, selling investments during these times can be even more costly. Historically, markets have recovered after a sharp downturn. Over the last 20 years, 7 of the best 10 days in the stock market occurred within two weeks of the 10 worst days. Staying invested over long periods of time is important, since missing out on the market rebounds can significantly impact your overall savings.
Diversify Your Investments
One of the best ways to mitigate the risks that come with market volatility is to spread your investments across different asset classes, sectors, and geographies. Different asset classes perform differently under economic conditions. A diversified portfolio will minimize the risk of a single asset’s poor performance and help smooth out returns over time.
Invest Regularly
It is important to continue to invest regularly in your 401(k) plan even during volatile markets. Avoid changing your retirement deferral percentage based on recent bad performance. 401(k) plans are a great tool for dollar cost averaging because there are regular contributions in both up and down markets. When the market is down, investing in your 401(k) plan lets you buy funds at lower prices. Over time when the market rebounds those funds can grow and value and benefit your retirement savings.
Final Thoughts
There is significant uncertainty about what will happen next, and the market may continue to be volatile. When making decisions on how to invest your 401(k) plan it is important to keep a long-term perspective and evaluate your retirement goals before making any short-term changes.
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Disclaimer: This communication is intended for general information purposes only and should not be construed as personal investment advice. The content provided is not intended to encompass all situations that impact personal investment objectives. This information and any questions as to your specific circumstances should be reviewed with an investment advisor.
FOR PLAN SPONSOR USE ONLY. Pensionmark® Financial Group, LLC (“Pensionmark’) is an investment advisor registered under the Investment Advisors Act of 1940. Pensionmark is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC). Pensionmark Financial Group, LLC/Pensionmark Securities LLC and Sequoia Consulting Group are non-affiliated entities.
