Financial Advice for Karen
Hey Kristin, I'm a 55-year-old single lady who's been working my butt off to max out my 401(k) and catch-up funds, only to see my portfolio taking a nosedive. Should I ease up until the economy bounces back? I wouldn't mind cutting back on overtime since it feels like all my hard work isn't paying off. I intend to work until I'm at least 65. Cheers, Karen
Kristin's Response to Karen
Karen, I totally get where you're coming from, and I'm sure many others can relate. The markets are down by over 14% this year, and with the possibility of a recession looming, things might get even worse. But does that mean you should slow down your investments? No way. Let me explain why.
You mentioned you've got a decade left before retirement. Despite current losses, you have plenty of time to not only recover but also benefit from future gains. Think of it this way: the stock market is like a clearance sale where everyone's rushing to the doors. This isn't the time to hold back; investing more now can lead to greater wealth once the markets bounce back.
Historically, bear markets last around a year with losses at about 36%, but the following bull market runs last nearly four years with gains averaging 112%. With stock prices low and your decision to invest more, you'll be able to snag shares at a bargain, potentially resulting in significant profits.
Considering a possible recession, you'll have more opportunities to buy stocks at discounted rates. Stay the course, and in due time, you'll reap the rewards of your current dedication.
It's essential to remember that market downturns are common, but you can take steps to lessen losses. Diversify your portfolio by looking into index funds or ETFs to reduce risk. During economic uncertainties, focus on defensive sectors like consumer staples and utilities for stable performance.
By making these adjustments, you'll be better equipped to handle market fluctuations. So, hang in there and keep investing! Best of luck, Karen! -Kristin
