A few weeks ago, amid another stock market plunge, we wrote a piece on how it’s important not to panic amid the ebbs and flows of the market. After all, it’s a marathon – not a sprint, and nobody can expect their investments to do nothing but increase. That’s just not realistic.
But as the market has seemingly become more volatile since we wrote that piece, with some experts even warning that the bull market on Wall Street is perhaps in its final days, it’s worth revisiting what your mindset should be these days.
As of the time of this writing, the stock market dips in the past week have been enough to wipe out all of the gains that were experienced in 2018. It seems a little silly to even hope that the stock market will break even this year given the impressive gains it has made, but with about a month left to go in the year and considering the significant drops that have come, just breaking even may be welcome news to many investors.
So, with the bull market coming to a possible end, there’s a big question: What should you do? Your investment strategy largely depends on your age. Here’s a closer look at what the experts advise you do based on your age:
- Millennial, 20s-30s: If you’re a young investor, then you’d be wise to keep your money in the market. That’s because you’re likely investing for the long-term, not the short-term – and again, investing is a marathon, not a sprint. There’s bound to be bear markets and bull markets that you’ll ride through as a young investor with a long-term plan, and while your return may suffer in some years, rate of return isn’t as important as savings rate for young investors.
- Gen-X, 40s-50s: It can be tempting to sell in a bear market, but it’s not very wise – especially for Gen-Xers who likely have at least 10-15 more years before retirement. In all likelihood, the bear market will be over with by then and they’ll have ridden it out. That means they’ll be able to cash out for a lot more than if they sold during a down time.
- Baby boomers, 60s-70s: This is the age where you should be getting creative in a down market. Generally, for those in retirement or quickly approaching retirement, it’s said that you should have about two years’ worth of living expenses at your disposal. And while you may have to cash out some of your investments, you should refrain from exiting the market completely. That’s because you could be living for several more decades, and therefore have many years left to budget for. It’s wise to keep some – if not all – of your stocks in a down market and bank on riding it out so that you can cash in later.
- Retired people: This is where things can get a little more tricky. If you’re nearing retirement or are currently retired, it’s always best to get more conservative and reduce risk. This involves building up your cash reserves. For older people, five to 10 years’ worth of cash reserves is often suggested. However, the experts say that it’s still a good idea to have some money in the stock market, namely because these are considered growth investments and with people living longer, it’s important to ensure that you’re covered.
It’s worth noting that at the time of this writing, nobody is declaring a bear market. However, the volatility of the market is a good enough reason to serve as a reminder for how people of different ages should approach a potential down stock market. It largely depends on your age how you react. How will you react?