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How to Weather the Rocky Stock and Bond Markets

Advice for your investments and for the rest of your personal finances

By Kerry Hannon

“Holy Mackerel,” my dad would have said, when the Dow plunged 767 points Monday, August 5. That stunning fall felt like the mad whoosh down the Kingda Ka roller coaster at Six Flags Great Adventure in New Jersey, the fastest in North America. Monday was the worst day of the year for the market and its sixth biggest point drop in history, due to alarm over an escalated trade war with China.

Stock Market
Credit: Adobe Stock

Then, Kingda-Ka like, the Dow turned upwards — rising 1.2% on Tuesday and making back more than a third of what it had lost the day before. Wednesday, it fell slightly.

The bond market’s been taking a pretty wild turn, too, a reaction to the Federal Reserve’s recent quarter-point rate cut and stock market jitters. Investors have been scooping up government bonds, raising prices and pushing down yields, which move in the opposite direction. On Wednesday August 6, the 10-year Treasury yield fell to 1.7%, its lowest since October 2016.

60% of Americans feel anxiety when thinking about investing in the stock market and 55% of boomers worry about a market crash.

What’s a small investor to do, especially one fearful of a retirement fund shrinkage? And what do the recent stock and interest-rate moves suggest for the rest of your finances? Jitteriness is high these days; a recent MagnifyMoney survey found that 60% of Americans feel anxiety when thinking about investing in the stock market and 55% of boomers worry about a market crash.

For advice on how to weather the rocky markets and manage our money, I turned to five investing pros. They had a number of recommendations but shared one viewpoint: Don’t panic.

Keep in mind, they noted, that the Dow is up more than 10% in 2019, the broader S&P 500 market index is up 13.5% and the small-stock, tech-heavy Nasdaq index has gained more than 16%.

The money mavens also said, however, that the recent topsy-turvy trends in the markets make this a good time to review your investment portfolio, including your 401(k) or IRA retirement funds.

Here’s their advice, followed by my own:

Lisa A.K. Kirchenbauer
Lisa A.K. Kirchenbauer  |  Credit: Lisa A.K. Kirchenbauer

Lisa A.K. Kirchenbauer, a Certified Financial Planner and founder of Omega Wealth Management in Arlington, Va.

As interest rates have lowered, now may be a good time to refinance your mortgage-related debt, especially if you don’t expect to have it paid off in the next ten to 15 years or have a variable-rate home equity loan or line of credit. [The national average rate for a 30-year fixed mortgage is about 3.7%; for a 15-year fixed, it’s roughly 3.2%. Home equity loans and lines are running around 6%.]

If you expect to retire soon, it’s time to revisit the overall asset allocation for stocks in your portfolio. It may have crept up during the earlier stock market rally this year. Consider repositioning some of your gains to more conservative investments like bond funds and Exchange Traded Funds (ETFs) or money market funds. You may also want to set aside a year’s worth of expected cash needs in a very conservative combination of high yield savings and short-term bonds. That way, regardless of what happens with a trade war and the stock market, you’ll have funds to live on.

Don’t pull all your money out of the stock market. Most of us can’t afford not to have growth in our portfolio. While the last week of the stock market’s volatility has been unnerving, we are still quite positive for the year. This kind of volatility is normal and really inevitable. We have just been spoiled by an unusually low amount of volatility in the financial markets over the last few years, except for the end of last year.

Focus on your longer-term financial goals, things that you can control — like your spending — and don’t get too focused on short-term events and headlines.

Eric D. Bailey, founder and chief executive of Bailey Wealth Advisors in Silver Spring, Md.

Eric D. Bailey
Eric D. Bailey  |  Credit: Eric D. Bailey

Typically, people going into retirement are concerned about outliving their money, market volatility, taxes, inflation and health care costs. This week’s volatility has heightened those fears.

If you’re in your 50s, my suggestion would be not to overreact. Markets go up and down, and since you still have ten or 15 more years of working and earning an income, the volatility should not be a great concern.

You can use this as an opportunity to buy stocks at lower prices, too. You might, however, begin to segment your portfolio and take 20 or 30% of it — an amount that would cover your first five years in retirement — and invest that more conservatively in fixed-income investments and the other 60 to 70% stays in equities for the long-term.

If you’re in your 60s, particularly your mid-to-late 60s, you should be looking at a moderate portfolio: 50% equities, 50% fixed income. Or even consider some of the new annuity products that can provide some protection. Without a doubt, you still need equity exposure in your 60s.

Anthony Saglimbene, Ameriprise Global Market Strategist, based in Detroit


Emotions run high when there are market swings, and fear can tempt you into making changes to your portfolio. Don’t let fear get the best of you. Short-term price fluctuations usually end up being nothing more than that, and headline news can amount to nothing more than noise.

Stay focused on the longer-term. Markets ebb and flow over the short-term, and even go through extended periods of pressure. Although we can’t predict exactly what will happen, historically, the market has rebounded, even after pronounced drops in value.

As we anticipate more frequent price fluctuations and market ups and downs, diversification remains a core risk-management tactic for investors.

David Rae, a Certified Financial Planner and president of DRM Wealth Management based in Los Angeles

Turn off the news and go on enjoying your day. The more you look at your investment account, the more likely you are to make emotional investment choices. The more you make emotional investment choices, the higher the odds of you making a costly mistake that will hurt your chances of a secure retirement. Even with the recent dips, your account should still be up substantially this year.

Kai Stinchcombe, the San Francisco area-based founder and CEO of True Link, a robo adviser service aimed at retirees and people within five years of retirement

If your portfolio is well-balanced, then the fluctuations are unwelcome and stressful, but they’re part of the plan. Think of it this way, you’re not surprised when there’s a traffic jam on the way to work because you gave yourself enough time to get there. Risk is part of an overall plan.

The market has these moments. You have to grit your teeth. It is a little nerve wracking, if it’s too nerve wracking, you have to rebalance your portfolio and lower your holdings in the stock market.

My Advice to You

Now for my advice:

Ramp up your investment mojo. Take the time to understand how the stock and bond markets operate. Having an educated view will help you stay the course. And by taking ownership of your portfolio, you have accountability. You won’t panic when the market does.

Maintain a balanced portfolio. My retirement funds are spread across a wide range of asset classes, from large companies and dividend-paying stocks to emerging growth firms to global stocks to real estate and bond fund indexes.

Keep an eye on what you pay for fees on your investments. High fees can do real damage to the value of your investments — sometimes, even more than stock market swings.

Work with a fee-only financial adviser, who is also a fiduciary. A fiduciary puts your interests first. I find having an adviser helps ease my mind when markets gyrate. She will remind me that my portfolio is built to withstand these rides at age 58.

Consider the possible upside of the downside. I review possibilities when a market drop presents lower stock prices on companies I trust and admire.

Photogtaph of Kerry Hannon
Kerry Hannon is the author of Great Pajama Jobs: Your Complete Guide to Working From Home. She has covered personal finance, retirement and careers for The New York Times, Forbes, Money, U.S. News & World Report and USA Today, among others. She is the author of more than a dozen books including Never Too Old to Get Rich: The Entrepreneur's Guide to Starting a Business Mid-Life, Money Confidence: Really Smart Financial Moves for Newly Single Women and What's Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties and Beyond. Her website is Follow her on Twitter @kerryhannon. Read More
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