We don’t need to rehash what’s happening in the markets right now; we all see it and feel it, and we know the cause.
Unfortunately, we don’t know where it’s headed.
The fear in the markets is evident by the spike in the iPath Series B S&P 500 VIX Short-Term Futures (VXX) last week, and with the obvious uptick in volatility in the S&P 500.
Here’s how the (SPY) and the (VXX) ETFs stacked up against one another.
Look, I get it. Your advisor is encouraging you to “stay the course,” which admittedly can sound either ridiculous or terrifying as you’re watching your account value dwindle away.
But yes, I am absolutely going to put this into perspective here.
The other day, I was talking with a client who is about 10 to 12 years from retirement. She said, “You always tell me it will come back.” It was more a nervous question than a statement.
I reassured her: It will. We don’t know when, and we don’t know how long the market malaise will last. And I use that term “malaise” deliberately. I’m not saying “crash.”
What to Do Now
I’m focusing here on your retirement portfolio. Quite candidly, I don’t care what you do in your trading accounts, as long as you approach your retirement money in a very measured fashion and don’t get tempted to turn your IRA into a vehicle for day trading.
I can guarantee you: You may be telling yourself it’s “logical,” but it’s panic-driven. I’ve seen this often enough to know that.
Step 1: Redefine 'Losing Money,' Because You Haven’t
When markets drop, it feels like you’re losing money. But unless you sell, your retirement portfolio hasn’t locked in a loss. That’s hard to internalize when account values are falling, but it’s critical.
Remember: Retirement investing is about long-term growth and income — not day-to-day price swings. Selling now transforms temporary volatility into permanent loss.
As a reminder, here’s a look at the cycle of bull and bear markets going back to the 1940s.
I’ll let First Trust, who created this chart, explain the significance:
“We believe looking at the history of the market's expansions and recessions helps to gain a fresh perspective on the benefits of investing for the long-term.”
• The average Bull Market period lasted 4.3 years with an average cumulative total return of 150.0%.
• The average Bear Market period lasted 11.1 months with an average cumulative loss of -31.7%.
Step 2: Segment Your Money: Stop Thinking of It All as 'The Market'
One of the most helpful ways to quiet your nerves is to break your portfolio into segments.
Your trading money can ride the rollercoaster. But your retirement money, aka “the serious stuff,” needs insulation, not adrenaline.
Again, I’m only talking about your retirement accounts here, which are not taking a trip to the casino.
Here’s one way to segment your retirement money into buckets. This will not only help you protect the near-term funds but also give the long-term money time to grow.
- Short-term (cash, CDs, near-term expenses)
- Medium-term (bonds, dividend stocks, defensive sectors)
- Long-term (equities with growth potential)
Here’s how that might look.
By the way, the client I mentioned above? We had already taken steps in her account to protect her money while also holding stocks that we’re letting run for the long haul.
Step 3: Stick With a Plan, But Adjust for the Moment
"Stay the course" doesn’t mean do nothing. It only means don’t panic.
Check your allocation. Most people tend to take too much risk, which results in a pullback that’s often even steeper than the S&P 500.
Having a high risk tolerance is not some badge of honor. If you’re nearing retirement or already retired, do yourself a favor and don’t boast about high risk tolerance. The math tells you your risk tolerance is on the lower side.
- Are you still properly diversified?
- Are you heavier in stocks than you thought?
- Is it time to rebalance, not retreat
Rebalancing simply means getting your investment mix back to what your plan dictates. Drift is to be expected, and you don't want to be rebalancing too often. A couple times a year is about right.
Here's how that might look.
Don’t turn your IRA into a trading account just because the headlines are scary. Rebalancing means adjusting with intention.
