NEW YORK (MainStreet) — What a start to the year for the stock market.
Going from a Dec. 24 high of 18,030 to an end-of-January low in which the Dow Jones fell 866 points, or 4.8%, makes "volatility" the watchword for 401(k) investors.
In an anxious stock market, what can 401(k) investors do to stabilize performance?
One common denominator among Wall Street experts is that "panic" is a lousy investment strategy for retirement investors, who should always take a long-term view on their portfolios. After all, markets go up and down all the time, but over the long run stocks historically rise.
Panic aside — way aside — keep these themes in mind when dealing with jittery markets:Read More: With Retirement Investments, It's Crucial That You Difference Between Advisor, Broker
Make sure you're diversified. When it comes to your 401(k), just as with your overall portfolio, it's important to hold a diverse range of investments aligned with your goals and risk tolerance, says Catherine Golladay, Schwab's vice president of 401(k) services. "Some sectors are hit harder than others in times of market volatility, so you don't want to have all your eggs in one basket," she says.
Take an "opposite" approach. Legendary investor Warren Buffet has said he likes to jump in to a declining market as others flee, because that's where value can be found. That's a good idea, says Anthony D. Criscuolo, certified financial planner with Palisades Hudson Financial Group in Fort Lauderdale, Fla. "Some people see energy stocks crashing and sell everything," he says. "Others want to put everything in U.S. large-cap stocks like the S&P 500 index because it's done well over the last couple years. It's human nature to be overly optimistic or pessimistic in believing recent market trends will continue."