The natural response to tough economic times is to panic.  The fear of unemployment mixed with thoughts of a delayed retirement usually results in an emotional decision about your investments. Because the decisions you make now will affect you once the economy recovers it is imperative you stop, relax and take a breath before making changes to your investment accounts. 


Review Your Asset Allocation  

Proper asset allocation is one of the most important areas to focus on during turbulent times. Not having the right balance of stocks, bonds and cash that reflect your risk tolerance and target retirement date can have an irreversible effect on your account. Stocks are risky and taking high risk with no guarantee of high returns is a bad idea when approaching retirement. When reviewing your allocation, it’s also important to keep in mind the number of years you have to regain loses from an improperly allocated portfolio decreases the closer you get to retirement. A simple way to estimate what percentage of your portfolio should be invested in the stock market is to subtract your age by 105. The number you get is the percentage of money that should be invested in stocks.   


Ensure You’re Diversified  

Evaluate your investments to ensure all your eggs are not are in one basket. Think Enron.     Employees invested all their money into one company and when that company went under so did their retirement accounts. In many cases, people lost their entire life savings. To prevent this from happening you should be exposed to a variety of investment vehicles including stocks, bonds, mutual funds and cash. The risk levels, types of companies, and their geographic location should also vary. By diversifying your investments, you automatically offset large losses by gains in another area.


Stay Informed

Now is not the time to ignore announcements from human resources or trash your investment statements before opening them.  Amongst other changes, many companies have decided to suspend matching contributions and some are even changing the investment options available in the plans. Changes in the investments available may disturb both the asset allocation and the diversification of your account, so stay alert. Staying informed enables you to be proactive in making adjustments that may be necessary.    


Ask For Help 

If investment talk makes you, crazy and you don’t feel comfortable developing your own investment strategy you may need to call a professional for help.  Your first stop should be your employer. Some employers offer access to financial professionals that provide free guidance on your accounts. Another place to check for free guidance is your state’s office of consumer affairs or economic development. If they don’t have resources listed on their website, give them a call and they usually can point you in the right direction. 




Copyright © Manyell L. Akinfe-Reed 2020 All Rights Reserved. No part of this document may be reproduced without written consent from the author.