How do I protect my 401(k) from market drops?

Sudden market crashes can make investors wonder how to protect them retirement savings.

Millennials who watched his parents lose money in the financial downturn of 2008, we understand how dangerous a slowdown can be for a person whose retirement savings are being invested in the market. In March 2009, stocks slipped more than 50 percent before bottoming out, and it took almost a decade to set new record highs again.

Inevitably, markets retreat and suffer outbreaks of volatility. To make sure your savings can overcome these storms with minimal damage, here’s what the experts recommend.

Diversify, diversify, diversify

Putting all retirement money in a single value or in a type of investment vehicle is considered reckless. If this investment goes south, you could lose everything. In general, financial experts recommend buying a combination of assets, or diversifying them, because it is almost impossible to predict when a single stock will take off … or fail.

“With diversification, you will never kill, but you are less likely to be killed. It’s the path to steady growth as it smooths the path along the way,” said Kyle Moore, CFP and founder of Quarry Hill Advisors. CBS MoneyWatch. He advises that investors should own all the shares in the market through a global index fund as the core of their portfolio.

A diversified portfolio may include:

• Small and large companies
• Different industries or sectors
• US and overseas stocks
• Good

And, of course, a cash deposit never hurts in an emergency. “Ideally, everyone should have a cash percentage to be able to buy additional portions during the fall of [dollar] average cost, “said Pierre Jouve, president and CEO of InsuraWealth. Average dollar costs refer to an investment strategy that adds smaller amounts to investments over time rather than making large investments at once. .

Rebalance

A diversified portfolio can have a mix of 60% stocks and 40% bonds.

To maintain this allocation, you may need to automatically rebalance a portion of the portfolio, creating an opportunity for investors to keep their asset mix under control. For example, if any part of your investment combination moves +/- 5 percent in a given time period (such as monthly or yearly), the combination can be adjusted to return to the original ratio. These measures can help cushion your savings for retirement from a crisis, even if no investment is risk-free.

When and how

Keep in mind that age is a factor. If you plan to retire in 30 years, a more growth-oriented portfolio (with higher-yielding assets that may be subject to higher volatility) may be more advisable than for someone approaching retirement. and that you want to start withdrawing your money from the market or living on a portion of the income from those investments.

“Thirty years … they should be the most aggressive and they should never try to time the market (no one should try to time the market) and get in and out,” said Paul V. Sydlansky, founder and CFP of Lake Road Advisors. He added that people in their 50s or 60s “should pay more attention and, in general, should be more conservative, because they will need the money before a 30-year-old.”

And, of course, “a 70-year-old man who is retired will have to be the most conservative, assuming he lives on the money,” Sydlansky noted.

Knowing when you plan to retire and what you will spend during retirement are key factors to consider when choosing a portfolio combination. Ask yourself: How much money do you need to retire? How long before you will need it?

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• 401k