If you’re saving for retirement in a tax-advantaged plan like the Retirement Savings Plan, fluctuations in the stock market do not have to keep you awake at night. Here are ways you can manage the risk associated with your investments and stay focused on your financial goals.
If you participate in a tax-advantaged plan like the Retirement Savings Plan of the Presbyterian Church (U.S.A.), it’s important to understand the types of risk associated with how your money is being invested so you can make certain it is in line with your investment style and timeline. You can also make adjustments to your investments as needed.
The Retirement Savings Plan offers a range of investment options so you can create the right mix of investments for your personal style and goals. This mix of investments is known as your portfolio.
If you’re someone who worries about every market fluctuation, or someone who is close to retirement, you might lean toward investments that are considered to be lower risk, like money market mutual funds. If you can tolerate a higher level of risk, then perhaps you’d be more comfortable with stocks and bonds. It’s important to remember that all investment contains risk — whether it’s risk of loss or the risk of your investments not keeping pace with inflation.
No matter how you invest, it’s also important to spread your investments across different sizes and types of companies and geographic areas (domestic and international) with the goal of protecting the value of your overall portfolio. Investment professionals call this diversification. Some even refer to the old adage of not putting all your eggs in one basket.
Your age and circumstances will also affect your investment portfolio; the decisions you made a few years ago may no longer apply. Even though investing for retirement is for the long term, it’s important to assess your goals and personal situation periodically.
It also helps to maintain perspective, remembering that volatility (the ups and downs in the stock market) is normal.
If you participate in the Retirement Savings Plan, you can change your investment allocation (how your account is invested) and make exchanges among investment options by logging into your Fidelity account, or by calling Fidelity Investments at 800-343-0860, Monday through Friday, 8:30 a.m. to 8:30 p.m. ET.