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How the Downturn Can Turn You into a Bargain Hunter

Siân Killingsworth / 28 Sep 2022 / Ubiquity Insights

Grizzly Bear Roaring

Guest post by Andrew Meadows, SVP of HR, Brand + Culture

The stock market has been something of a wild ride for the past few years, and many people are justifiably concerned about how the fluctuations might affect their retirement investments. Having been in the biz 18+ years, I’ve seen it all: the dot com bust of the early aughts, the ’08 recession – and our CEO lived through the 70s-80s stagflation/inflation situation. And we’re here to tell you that it’s going to be okay.

Remain Calm

Don’t panic. Seriously, panic can be one of your worst enemies when the market is headed south. The impulse to jump in and “fix” a lagging portfolio can feel irresistible. But resist! Making rash decisions often leads to big-time regrets.

The Wall Street Journal had a great article recently that reminded me—even in past periods of stagflation or high inflation, the market over those bearish periods still returned about 5-ish%. It’s not amazing, but it is a respectable return.

Although we’re going through some ups and downs, try to remember that you are in it for the long haul. Not just a few weeks or months, but in many cases, 30 years or more. This downturn will eventually come sunny side up again.

Stick to the plan!

First and foremost, don’t start changing things like your allocation or portfolio balance. Retirement plans are intentionally designed to stand up to fluctuations in the market.

History shows that those who are able to stay the course do much better in the long run. In the chart below, three different types of investor are described: the stalwart, who sticks to their plan; the waffler, who yanks money out and then puts it back in again and again; and the reactor, who just pulls their money out of their account.

You can see that the person who does the best over the lifetime of the investment is the stalwart. Obviously, pulling your money out will not earn you any interest, so the reactor does the worst. And the waffler is trying to time the market, but this tactic is well-known to be nearly impossible to get right.

 

Graph depicting 3 possible outcomes of keeping funds in the market, taking them out & putting back in, or taking funds out altogether

Don’t Pause Your Contributions

I see a lot of people giving in to the temptation to press the hold button on their retirement contributions. They are betting they’ll avoid some pain if the market continues to head south. But again, this is an issue of timing. It’s much more likely that you’ll miss out on the recovery.

If you were comfortable with how your money was invested before this happened, just ignore the noise on the TV or newspaper and keep contributing.

There are other compelling reasons to keep contributing:

  • If you have plenty of time until retirement. People in their 20s, 30s, 40s, and 50s have plenty of time to see a rebound and recoup any present losses.
  • You like the idea of paying less in taxes this year. Remember, retirement savings lowers your tax liability. For most retirement plans, the money put in reduces the amount of income you’re taxed on, allowing your money to grow tax-free as well.

Go Shopping for Bargains!

My last piece of advice is to go shopping! I don’t like paying full price on anything else I have to buy; do you? Look at it this way: the things you need for retirement are cheaper now than they have been for a while—rejoice!

In fact, now might even be the perfect time to load up on quality investments at rock-bottom prices. Stocks are on sale. Shares are cheap. You may have had your eye on a few different investments, but the purchase price was too high. Now, many prices have come down—but for how long? It’s time to pounce. Hello discount shopping!

It’s like dollar cost averaging. That’s where you buy a security a little bit over a period of time instead of all at once. Since you can’t know in advance if the price of that stock today will be higher or lower in a month, you just buy small amounts. Over the course of a year, the average cost per share will actually tend to be lower than if you go all in from the beginning.

Just remember: no matter how nerve-wracking this feels, it is absolutely possible to get through this and still meet your retirement goals. Try to think about this moment as a bargain-hunter’s opportunity.

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice. Ubiquity Retirement + Savings is your designated service provider for administration and record keeping services.

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San Francisco, CA 94104
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© 2022 Ubiquity Retirement + Savings
Privacy Policy
Do not sell my info
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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