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Here’s how to manage your stocks in a bear market


If you’re nearing retirement, the stock market’s recent plunge probably has you worried about your nest egg.

This descent into a bear market amounts to a financial beat down. And as boxer Mike Tyson once said, “Everybody has a plan until they get punched in the mouth.”

The Dow Jones industrial average losing nearly 30% of its value in a few weeks is analogous to a jab to the jaw. The unsettling volatility, with the market suffering daily swings of 5.34% in March vs. moves of less than 1% last year, according to S&P Dow Jones Indices, led to emotional reactions from many 401(k) investors.    

Yet, protecting your retirement account from a knockout blow requires a financial plan to ensure you exit the downturn in as good as shape as possible. Fortunately, retirement isn’t a one-time event but plays out over decades. So, there’s time to recover from market drops.

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401(k) written in colorful letters next to a piggy bank.

To stay on course, it’s best to slice your retirement savings into different buckets, says Nicole Horton of Copeland Horton Wealth Management. Create a bucket of cash for short-term needs, a bucket for growth investments like stocks for long-term wealth building and a bucket for mid-range financial obligations.

Here’s some advice on how to cope with volatility:

If you’re 1 year from retirement

Don’t get too caught up in the scary day-to-day headlines, says Daniel Duca, managing advisor at Altfest Personal Wealth Management. The broad stock market’s 20% drop in the first quarter may spook you into thinking your portfolio is down that much. But it likely held up better if you’re diversified. A $100,000 portfolio at the start of 2020 that was 60% stocks and 40% bonds and cash, would only have suffered a $12,000 stock decline through March 31, not $20,000. Following financial news too closely can “confuse the situation and add to anxiety,” Duca says.

*Establish a cash cushion

The timing of the current sell-off isn’t ideal for workers with plans to retire this year. Falling asset prices deliver an immediate financial and psychological blow. But there are ways to soften the short-term hit to your 401(k).



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