Don't sell the stocks in your retirement portfolio because of the drop in the market!

[james.hendrickson]

I have been seeing a good amount of discussion on internet forums I frequent as to whether investors should sell stocks in their retirement accounts because markets have been volatile. The answer is: probably not.

U.S. equity markets have a long term upward bias - this is because the economy incrementally grows over time. Dips, corrections and downturns are both hard to predict and are historically inevitable. So if you hold onto your investments and wait out the dips, you should make money in the long run.

So, bottom line - don't sell just because the market has a downturn.

"The only people who get hurt in a roller coaster are the ones who try to get off in the middle of the ride." -Dave Ramsey

[disneysteve]

Very true. People get spooked when they see the market having a down day. A couple of weeks ago when the market dropped 1,000+ points, I'm sure a lot of folks panicked. But everyone who held on saw it climb right back up. Heck, the DJIA was up almost 350 points yesterday alone. Anyone who bailed out lost some serious money.

Now if you are already retired, the answer might be different, but your stock exposure should be smaller now anyway so the impact of a correction should be less.

[QuarterMillionMan]

I was actually waiting for that correction a few weeks ago to buy more stocks which I did with my 2018 Roth IRA contribution of $6500.

[SavingSteve]

What if I buy more stocks because of the drop in the market? Am I timing the market?
If I stay the course with my regular 401K retirement savings, but I buy more with non-invested savings when the market drops, perhaps funding a roth IRA with after tax money that's maybe sitting in my EF, is that considered bad behavior? Or should I dollar cost average the Roth money no matter what?

[comicguy]

I don't think it is timing the market rather it is taking advantage of the market. I just did the same thing with several stocks that I own. They dropped noticeably so took some extra cash that I had and bought more. Those same stocks have mostly recovered to previous levels so some "extra" money made.

[Gailete]

I also took what was spare and bought some more shares of one of the stocks I owned. I may kick myself later, or pat myself on the back.

[msomnipotent]

I bought a little on the dip, too. The rule of stock picking is to buy low and sell high. If people think that is timing the market, let them think that. If they refuse to buy on a dip because it is timing the market, well then, more for me.

Every time there is a correction, I think about when I was working in an office with mostly older women during the dot com bubble. Almost all of them freaked out when the bubble burst. One woman started crying because she was a week away from retiring and took a big hit. There was a lot of panic selling. I don't think that any of them had any diversity in their portfolios and just assumed that stocks always go up.

You need to worry about having a proper allocation more than worrying about a dip, and you need to honest with yourself about how much risk you think you can take. My 403b was 100% in stocks. I just switched to Vanguard and will be picking funds today. It will still be heavily weighted in stocks, but maybe a little bonds. I can afford to be riskier because my husband's 401k is on the conservative side. I'm even thinking of making it more conservative since he doesn't handle risk well and we are depending on his account more than mine.

[james.hendrickson]

Now if you are already retired, the answer might be different, but your stock exposure should be smaller now anyway so the impact of a correction should be less.

Absolutely, Disneysteve. People seem to panic sell regardless of how the fundamentals of their funds or stocks are doing. That has always struck me as irrational and self defeating.

[greenskeeper]

buy high, sell low, that's my motto

[TexasHusker]

I was actually waiting for that correction a few weeks ago to buy more stocks which I did with my 2018 Roth IRA contribution of $6500.

That was no correction.

[TexasHusker]

I have been seeing a good amount of discussion on internet forums I frequent as to whether investors should sell stocks in their retirement accounts because markets have been volatile. The answer is: probably not.

U.S. equity markets have a long term upward bias - this is because the economy incrementally grows over time. Dips, corrections and downturns are both hard to predict and are historically inevitable. So if you hold onto your investments and wait out the dips, you should make money in the long run.

So, bottom line - don't sell just because the market has a downturn.

"The only people who get hurt in a roller coaster are the ones who try to get off in the middle of the ride." -Dave Ramsey

Many folks these days haven’t lived through an extended bear market. A protracted bear can absolutely destroy your retirement or any other portfolio. While it is true that the stock market rises over the long term, SO DOES PRETTY MUCH EVERYTHING ELSE.

This bull market is years old, and there is without question an extended bear coming at some point. And that worm can turn really fast.

In 1999, everything was milk and honey. Markets were soaring. The nasdaq reached near 7,000. It then took a 75% haircut. It is now 2018 and it STILL hasn’t made it back. That crash washed a lot of folks out of the stock market forever. If you opt to stay invested through the next bear, expect on losing about 41% of your portfolio - that’s the average loss in a bear. You will then need to plan on the next bull market rising 70% just to recoup your losses. That can take a long time.

When the market truly turns south - not a one week dip - you are going to see absolute PANIC.

“What the hell is happening”?
“This isn’t supposed to happen!”
“But I’ve been dollar cost averaging!”
“I thought the markets went up over time??!!”
“Who the hell sold me this crap?”
“But we were planning on retiring in two years!”
“Why doesn’t the government do something?”
“Our life’s savings is gone!”

I heard all of this and more in the early 2000s.

I’ll hear it all again, likely sooner than later: this bull is now 9 years old.

Buckle up. Don’t be stupid.

[james.hendrickson]

Many folks these days haven’t lived through an extended bear market. A protracted bear can absolutely destroy your retirement or any other portfolio. While it is true that the stock market rises over the long term, SO DOES PRETTY MUCH EVERYTHING ELSE.

This bull market is years old, and there is without question an extended bear coming at some point. And that worm can turn really fast.

In 1999, everything was milk and honey. Markets were soaring. The nasdaq reached near 7,000. It then took a 75% haircut. It is now 2018 and it STILL hasn’t made it back. That crash washed a lot of folks out of the stock market forever. If you opt to stay invested through the next bear, expect on losing about 41% of your portfolio - that’s the average loss in a bear. You will then need to plan on the next bull market rising 70% just to recoup your losses. That can take a long time.

When the market truly turns south - not a one week dip - you are going to see absolute PANIC.

“What the hell is happening”?
“This isn’t supposed to happen!”
“But I’ve been dollar cost averaging!”
“I thought the markets went up over time??!!”
“Who the hell sold me this crap?”
“But we were planning on retiring in two years!”
“Why doesn’t the government do something?”
“Our life’s savings is gone!”

I heard all of this and more in the early 2000s.

I’ll hear it all again, likely sooner than later: this bull is now 9 years old.

Buckle up. Don’t be stupid.

Texas, so what do you suggest the average investor do? Diversify? Overweight cash? Short the indexes?

[corn18]

Nobody knows nothin’

[corn18]

Texas, so what do you suggest the average investor do? Diversify? Overweight cash? Short the indexes?

He never gets that far. He only berates the stupid 401k people.

[rennigade]

Many folks these days haven’t lived through an extended bear market. A protracted bear can absolutely destroy your retirement or any other portfolio. While it is true that the stock market rises over the long term, SO DOES PRETTY MUCH EVERYTHING ELSE.

This bull market is years old, and there is without question an extended bear coming at some point. And that worm can turn really fast.

In 1999, everything was milk and honey. Markets were soaring. The nasdaq reached near 7,000. It then took a 75% haircut. It is now 2018 and it STILL hasn’t made it back. That crash washed a lot of folks out of the stock market forever. If you opt to stay invested through the next bear, expect on losing about 41% of your portfolio - that’s the average loss in a bear. You will then need to plan on the next bull market rising 70% just to recoup your losses. That can take a long time.

When the market truly turns south - not a one week dip - you are going to see absolute PANIC.

Which is an excellent example why people need to have a proper asset allocation in case this happens.

Heres some advice...if you're approaching retirement it may be a good idea to have a more conservative portfolio. If you're at 90/10 or 80/20 and the market tanks...so will your portfolio.