Four Steps to Handling a Tricky Market

If the volatility in the financial markets over the past few years has got you wondering what makes the investment markets tick, you’re not alone.

From the mainstream media to the blogosphere, everyone’s working to demystify the markets. But most agree on one thing: No matter how right it might seem to sit out a tough market now, this move rarely makes sense over the long term.

Retirement should be one of your biggest financial goals, and you’re saving and investing for the long haul. Still, it’s human nature to be nervous about your retirement savings in times of volatility. Here are some steps to save and invest with discipline.

1. Don’t try to time the market

If you’re hoping to sell all your investments at the high point of the market and buy back in at the low point, you’re counting on a crystal ball that nobody has. It’s just too risky a strategy for your retirement savings. Choosing investments that have no investment risk (such as all cash) carries the risk that your savings won’t keep up with inflation. By the same token, buying all your shares at once exposes you to the possibility that your investments will lose value quickly if the market low hasn’t been reached.

2. Consider dollar cost averaging

Dollar-cost averaging means investing the same dollar amount at regular intervals. When prices are low, this fixed dollar amount buys you more of the security; when they’re high, that fixed dollar amount buys less. Most participants in the UC Retirement Savings Plans do this naturally through their regular contributions, assuming they don’t change their investment elections frequently.

3. Practice diversification and asset allocation

One of the most important things you can do to help shield your investment portfolio is to diversify, both within asset classes and across them. Asset allocation is straightforward: You spread your money among different types of investments, or asset classes, such as U.S. and international stocks, bonds, and short-term investments. Once you’ve done that, you can diversify investments within each of these classes. While it cannot ensure a profit or guarantee against a loss, diversification allows an investor to seek some downside protection and participate in the upside potential of asset class movements.

4. Save and invest for the long term

To help calm the jitters caused by short-term fluctuations, it’s best to focus on long-term trends and your long-term goals. Market volatility decreases over time. Holding a stock for 20 years reduces its volatility by two-thirds, compared with keeping it in your portfolio for just a year. Of course, volatility isn’t necessarily a bad thing—dramatic short-term changes in value can be positive or negative. And historically, time has reduced the risk of holding a diversified stock portfolio.

Need to take another look at your investment options?

Log in to your account at NetBenefits or call Fidelity Retirement Services at 1-866-682-7787.


Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

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