Last Updated on Oct 31, 2021 by James W

When it comes to retirement planning, most seniors are still wary of investing in the stock market. The high market volatility and uncertainty of recent times have certainly not helped investor confidence. In September, the market volatility index hit its highest since May. Investors are also fearing a crash in the next few months, even as most of the major indices remain up since the beginning of 2021. However, with rising inflation, reduced consumer spending, and indications of a recession, it is understandable that seniors would be skeptical of the stock market outlook. For those worried about taking the risk out of stock investing or creating a retirement stock portfolio that can withstand the unpredictability of the market right now, here are 3 things that can help.

Anticipate A Stock Drop And Keep A 12 Month Stock Investment Buffer

When it comes to the stock market, being prudent is always best. While there are signs indicating a potential market crash there is no definite indicator of when this will happen. Some investors claim we are in a bear market run right now which can be scary particularly to novice investors. As a retiree, there is also the fear of not only losing long-term gains but also more immediate financial compensation like dividends in the next year or 5 years. To hedge your bets against this, consider your stock portfolio allocation carefully. Ryan Marshall of Ela Financial Group recommends that retirees aim to have at least12 months invested in less volatile investments to support them in the event of a stock market drop. This comes from diversifying your portfolio with more secure T. Rowe Price recommends that new retirees keep 40% to 60% of their assets in stocks as it can withstand inflation better than bonds. Less risk investment options include money market accounts, treasury securities, and savings accounts. However, keep in mind that money in a savings account can lose its purchasing power each year due to the inflation gap. 

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Keep An Eye On The Long Term Gains With Longer-Term Stock Picks

If there was ever a time to avoid panicking, it is the present. A stock investment portfolio should always be chosen with long-term goals in mind- especially right now. So when including stocks for your retirement portfolio, take your timeline into consideration. If you are fast approaching retirement and looking to benefit from stock dividends in 5 years, it may be better to invest in fixed income funds. If you do choose to buy the dip, think of stocks that will perform well in 5 to 10 years from now. This means taking your research beyond the standard earning per share (EPS) and recently declared performance figures (although these are important in your computation). Aim to include factors like the company’s innovation plans and any patterns of stock fluctuations, particularly in the recently popular tech stocks. Investing Daily Personal Finance Review provides a regular rundown of any emerging opportunities in tech stocks but also examines long-term predictions for the company and market.

Capitalize On Market Highs By Transferring Gains To More Secure Investments

Another way to minimize the risk to your stock portfolio during a volatile time and as a retiree is to divest and redirect your gains. Wall Street hit record highs this week as corporations continue to declare performances beyond predictions. Indices like the S&P 500 and Dow Jones Industrial Average hit record levels and investor optimism soared. During market highs like this, it is a good idea to withdraw some of your equity gains and reinvest in less risky (and more liquid) investments to supplement your retirement needs. Using the gains on your investment means your stock portfolio remains unchanged while you build up funds outside of your stock portfolio to cushion the impact of any market dips or finance more immediate needs.

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Finally, think about your asset allocation. The general rule is that you should subtract your age from 100 to get the percentage of your portfolio you should keep in stocks. Your asset allocation should also change as you get older. To find the best asset allocation for your age and goals, use an asset allocation calculator. While you cannot completely avoid the volatility of the stock market and its impact on your retirement portfolio, you can work to mitigate the impact and ensure your retirement portfolio is protected


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