The Market is down, What to do now with your 401k?

Mark Kooiman |

The market volatility and overall economic slowdown that we’ve seen as a result of the global coronavirus outbreak came at an unprecedented pace.  As a result, many investors feel blindsided by this recent bout of market action.

All major market corrections have some common traits:

  • Even the best analysts don’t see them coming or assess them accurately
  • A low point when retail investors believe it is hopeless to invest (market capitulation)
  • Recovery of asset prices happens while bad news is still coming in
  • A recovery and new highs are reached in major markets



Keep Saving? You may be saying to yourself “why should I keep putting money into something that is going down in value?” Given the sudden drop in world stock markets, that is a very reasonable concern.



Our advice is simple: Don’t stop contributing to your account just because the market pulls back.  While you may want to reassess the amount of risk you are taking with your investments, we believe that now, more than ever is the time you stick with your overall savings plan. A strategy where you systematically invest money from each paycheck or on a periodic basis is called “dollar cost averaging”.  Contributing now means you’re buying at very low prices.



Back to your regularly scheduled investing: By investing in your 401k account a little bit each paycheck you eliminate savings procrastination and avoid trying to time the market, which is nearly impossible.



Source: J.P. Morgan


Why stay invested? As shown in this chart, some of the best days in the market came shortly after the worst days.  If you sell/get out of the market when its down, you might miss some really good returns.  Numerous studies have shown that regularly scheduled investing delivers superior returns over trying to time the market. (Source: J.P. Morgan)





What if I had to stop investing?

  • If this market volatility has caused you to sell off and go to cash, please do have a plan for when to get back in. Timing the market is a nearly impossible feat to pull-off. Oftentimes the market will start its recovery long before the economy is back on track, so it’s easy to miss the most important part of the recovery. Because of this, we generally don’t recommend trying to jump in and out of the market.
  • If you must stop or reduce contributions for personal reasons, set a calendar reminder and a goal for yourself to log back into your account. Then, try to increase your contribution by at least 1% every 6 months until you’re on pace to save at least 10% of your paycheck.



What you can do:  These are challenging times for all of us, and we can let the bad news spin us out of control.  Here’s what you can do:

  • Try to focus on what you do have control over.  You can control the investments held in your account.
  • You can choose between Target Date Funds, Model Portfolios, or create your own portfolio out of funds that range from safe cash to more aggressive investments.
  • Monterey Private Wealth created seven Model Portfolios, ranging from conservative to aggressive, that you can choose to make it easier for you to invest.
  • If you make changes, keep your long-term goals in mind.
  • Control your discretionary spending.  This is a good time to cut back on some of those discretionary or luxury items.


Remember: Maintain a long-term focus on everything you do, and don’t let news headlines cause you to make short-term decisions.









Copyright 2020 Monterey Private Wealth, Inc. Information provided in this document is for educational purposes only. Personalized financial advice is available only for clients of Monterey Private Wealth