The start of 2022 has been a bit of a wild ride as the market has experienced volatility similar to when the Coronavirus pandemic began in early 2020. During times of volatility, most investors begin to feel angst and anxiety through no fault of their own; it’s human nature to react like that when something we care about is being affected. For most, retirement is the pinnacle of what we all work so hard to achieve, and when we see wild fluctuations in our 401(k) account balances, it creates nervous thoughts like “What if I lose it all?” or “Will I still be able to retire?”
As a plan sponsor, you may be wondering what you can do to help your employees be better prepared for times like these. On the other hand, you may be a participant in a 401(k)-plan wondering what your employer is doing to help prepare you for times like these. This is when a good retirement plan advisor can show value and differentiate themselves from other advisors. During market corrections, high-quality participant education is important to shift investors’ perspectives of volatility from negativity and concern to positivity and opportunity.
Advisors that offer a comprehensive participant financial wellness program are likely holding regular education sessions through various mediums such as recorded videos, emails, flyers, and webinars throughout the year. This develops a baseline knowledge of financial understanding of investing, helping investors to shift the mindset from “Oh no, I’m losing money” to “Alright, stocks are on clearance!” While there will always be the human nature side of the equation that will kick in and create concern, those equipped with the right education fair better at pushing through the storm because they are able to focus on the rainbow that appears on the other side.
The message we often try to remind our plan sponsor clients and their employees is that investing for retirement is designed for the long-term. There will always be some level of short-term movement, but it’s what you do, or do not do for that matter, that will have the most impact on your future account value. One of the services we offer our clients is to conduct one-on-one consultations with any participants that would like one. It’s in these meetings that we have the greatest impact on investors by ensuring they have a properly diversified portfolio that matches the level of risk they are comfortable with and the amount of time they will be investing.
The variables that need to be kept in mind when approaching investing are:
- Time Horizon – How long until you will need this money
- Risk Tolerance – How much risk are you comfortable with
- Diversification – Don’t put all your eggs in one basket and lastly,
- Dollar Cost Averaging – Continue contributing to your account during both up and down markets
Proper education around these factors is what will have a lasting impact on investors and their success in a retirement plan.
If you are the sponsor of a retirement plan or an individual investor, it is also important to have patience. You likely have developed your plan for the future and have your account invested in an allocation that aims to achieve your goal. During times of market uncertainty, it is critical that you maintain your focus on the long-term picture. If you have questions or concerns, be sure to reach out to a financial professional for education and guidance. If your current retirement plan doesn’t offer education, it may be time to look for a financial wellness solution to help provide the necessary guidance.
Want to learn more about what educational solutions we can offer to your organization’s retirement plan? Let’s have a conversation!
Diversification and asset allocation do not ensure a profit or guarantee against loss.
The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal, or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, LLC, an SEC Registered Investment Advisor.