Mistakes 401(k) Plan Participants Make During Market Uncertainty

Mistakes 401(k) Plan Participants Make During Market Uncertainty

October 07, 2022

When markets are volatile, it's perfectly normal to want to react. Your emotions might lead you to believe you must make significant changes regarding your retirement plan. However, in this blog post, we'll discuss common mistakes 401(k) participants make during market uncertainty and why these decisions might not be in your best interest.

Should I stop making contributions to my 401(k) plan?

Markets are currently volatile. That's no secret.

In light of that, in a recent conversation with a 401(k) plan participant, they wondered if they should stop making contributions to their 401(k) plan until markets get clearer. However, the truth is that things never get clearer when it comes to markets, and it's not the time that you want to stop making contributions. As investors, we want to buy when prices are low. Then, over time, as markets appreciate in value, we take advantage of that appreciation to benefit our future selves.

Should I get out of my investments and go to cash?

First, if you're considering getting out of your investments and going to cash, you should revisit that decision within your financial plan to ensure you've got the proper allocation. Also, you don't know if you're at the bottom when you're selling, so you could be selling low, and then you're gonna be faced with the decision of when to get back in. So while you might feel you'll avoid some anxiety by getting out of the market now, that anxiety is soon replaced with the stress of when do I get back in.

What's the takeaway?

There really never is clarity or certainty. That much is constant. So recognize when you're feeling emotional. You will have emotions surrounding your portfolio, and that's okay. We all react emotionally to negative news or seeing our account values drop. The best thing to do is to take the long-term perspective and let the logical self come in and stay disciplined. But, again, assuming you've got the proper investment allocations for your financial plan.

If you found this article helpful, checkout our blog post: Three Actions Investors Consider During Times of Uncertainty

Interested in learning more? Check out our YouTube video: 5 Common Mistakes 401(k) Participants Make