COVID-19 And Your 401(k)

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As states ease their stay-at-home restrictions, there is uncertainty regarding how COVID-19 will evolve over time. Will infections spike in the near future? If so, will the economy worsen? The many unknowns make the stock market even more unpredictable. For 401(k) owners, this uncertainty can feel daunting. Here are four tips to help you and your 401(k) navigate the stock market amid the Coronavirus:

  • Keep Contributing

    • Even when the stock market takes a hit, keep making 401(k) contributions. By doing so, you manage your risk during a turbulent market due to dollar-cost averaging. As your contributions go into your account, you are buying stocks/funds at reduced prices, which is beneficial considering that the stock market rises in the long run.

  • Stay The Course

    • Severe 401(k) losses can cause a lot of discomfort, which triggers some investors to start panic-selling. If you are a long-term investor (e.g. not retiring within 3 years or so), you should NOT be concerned with short-term market dips. For participants who ARE retiring in less than 3 years (again, give-or-take), it might make sense to adjust your portfolio, such as dialing back your aggressiveness. However, most 401(k) owners should carry forward, assuming you are properly allocated in the first place (relative to your time horizon and risk tolerance). The market will not stay down forever.

  • Forget Your Login & Password

    • When the market falls, the natural reaction for many of us is to go online and look at our account balance. Avoid this. Logging in frequently may lead to more stress than actual comfort. You can create an unhealthy obsession with the short-term and lose sight of the big picture by constantly logging in to view your account. This is something to refrain from amid an unstable market.

  • Seek Help If You Need It

    • A down market can bring angst, nervousness, and confusion. If you are hesitant and unsure about how to manage your 401(k) in the weeks and months to come, talk to an advisor. Although it may sound simple, speaking with a trusted professional can provide reassurance during unprecedented times.

I hope you enjoyed reading!

Joshua J. Baird
Investment Adviser Representative