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U.S. stocks, for example, fell precipitously on Monday – experiencing their worst drop of 2019 – amid an ongoing trade war with China. Tensions are likely to continue to weigh on stocks throughout the coming months as negotiations have largely stalled.
President Trump has been touting the benefits of a strong U.S. economy and stock market on Americans’ retirement accounts. During a rally in North Carolina earlier this month, he said that if a Democratic opponent “ever got into office,” people’s 401(k) accounts would experience a “big crash.”
The number of so-called 401(k) millionaires reached 180,000 in the first quarter of 2019, according to Fidelity. That’s a 35 percent quarter over quarter increase.
But what should you do if the market starts heading in the other direction?
“The biggest mistake people make when it comes to investing is investing off of emotions,” Bryan Bibbo, advisor and retirement planning professional with the JL Smith Group, told FOX Business. “The number one thing I always recommend is for people to have a financial plan in place.”
That plan should include having cash readily available in case of emergencies. But it should also include “safe money” that investors take less – or no – risk on, which can be used on planned expenses, Bibbo said.
As for money tied up in the market, you should “not be worrying about pulling [it] any time soon,” Bibbo said.
Melissa Ridolfi, vice president of retirement and college products at Fidelity, told FOX Business that having a plan in place – including a diversified portfolio adjusted to particular timeframes and risk tolerances – increases confidence.
And once that plan is in place – which should take downturns and even potential crashes into account – it’s actually better not to adjust it.
“Historically, we’ve found that the more an investor changes their allocations, the worse their performance is. Unless you want to lock in losses, changing your plan isn't generally a good idea,” Dan Egan, director of behavioral finance and investing at Betterment, told FOX Business.
However, for people with workplace retirement plans, like 401(k) accounts, downturns are good times to consider increasing contributions as buying opportunities open up, Bibbo said.
Having a plan will also make your results more predictable, Greg Hammer, CEO and president of Hammer Financial Group, told FOX Business. That’s why it may be worth sitting down with an expert to proactively plan for these events, based on your individual circumstances and needs.
The latest trade tensions came as China let the value of the yuan fall against the U.S. dollar, after the Trump administration announced its intention to impose 10 percent tariffs on the remaining $300 billion worth of Chinese goods coming into the U.S.
President Trump accused China of manipulating its currency, which he said was a sign China was paying the cost of the tariffs – instead of American consumers.
Talks between the world’s two largest economies are expected to resume next month in D.C.