Instructions

Think long-term. A 401k is meant to be a long-term investment account. You are not required to take distributions from your 401k until you are over 70 1/2 years old (although you may begin distributions as early as 59 1/2) (see reference 1). While it is hard to imagine the market ever going up when it drops dramatically, history has shown that over time, markets do recover. If you have 30, 20 or even just 10 years left until you begin withdrawing from your 401k, you have time for your investments to recover. Think of it this way—if the market reverts to its average long-term return of approximately 10 percent per year, your investments should double every seven years or so. When you have time on your side, you should stick to your investment plan and let the markets naturally recover.

Ask for help. Even if you think you don’t need investment help, it is only human to need emotional support during a severe market downturn. Find an adviser, or someone whose investment advice you trust, and lean on him for words of encouragement. Things truly look bleak in the midst of a market selloff, but investors and advisers who have been through bad markets before understand that both good markets and bad markets eventually have an end, and that staying active and engaged during the rough periods makes for better ultimate investment returns.

References

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