- Retirement savers may be tempted to sell amid recent market shocks.
- Experts say it's best to stay the course instead.
- But there are other moves you may consider.
Days of record market losses may inspire 401(k) investors to take action.
Yet most experts caution against doing just that.
The reason: Days when the markets are down tend to be closely followed by days when the market is up. If you sell and run for cover now, you may miss the upside.
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"The reward doesn't come without the risk," said Sri Reddy, senior vice president of retirement income and solutions at Principal Financial Group.
Once you have identified a level of volatility you're comfortable with, experts generally say you should try to stay the course even during choppy market activity.
"It's especially important to not panic," said Rita Assaf, vice president of retirement leadership at Fidelity Investments. "Stick to your long-term plan."
If you're still tempted to act, there are some moves you can make that experts say will position you for future growth.
Revisit your allocations
It is important to have a healthy mix of equities and bonds.
Ideally, your diversified investment strategy will expose you to different areas of the market to help manage your overall portfolio risk, Assaf said. That includes U.S. small cap, large cap and international stocks, as well as investment grade bonds.
Because stocks have generally climbed for a prolonged period of time, it's also important to check to make sure that your portfolio has not drifted to a higher equity allocation than you originally intended, Assaf said.
"You want to make sure your portfolio is balanced and that your equity allocation is in line with your goals," Assaf said.
Try to have ample cash set aside
Having enough cash set aside for your near-term needs will make you better prepared to weather market shocks.
If you are near or already in retirement, make sure you have ample liquidity that will provide for one to two years of your spending needs, Reddy advised.
"What you don't want to do is have a market correction and then you start withdrawing money out of the market," he said.
Investors of all ages should have three to six months of cash to cover essential expenses set aside in an emergency fund, Assaf said.
Resist the urge to check your account
Amid dramatic market headlines, some investors will log into their accounts two to three times a day to check on their money, Reddy said.
But keep in mind the balances you're seeing probably have not been updated to reflect real-time activity. Because 401(k) plans are made up of mutual funds, the latest balances are typically not available until the end of the business day.
Most people tend to underperform the broader markets because their timing is always off, Reddy said.
"You can never predict the big moves up, the big moves down or the intraday volatility," he said.
Seek professional guidance
Having a long-term plan tailored to your needs and goals makes it easier to stay the course.
To make sure you're on track, it's best to consult a professional financial advisor who can help you prepare for all scenarios, Assaf said.