KNOXVILLE, Tenn. (WATE) — Finances can be confusing and scary, especially amid global turmoil. With uncertainty surrounding Russia’s invasion of Ukraine, many people are wondering what will happen with their 401(k).
The crisis is starting to become an issue on Wall Street. U.S. stocks have been volatile since the conflict started.
Changes in the stock market are common. We often see quick rises and falls, but the recent stock market rollercoaster has been worrisome for those with a 401(k).
Brian Stivers, a local financial and investment advisor, of Stivers Financial Group shared some insight on what the crisis means for those with a 401(k).
Stivers says, “Look to history. Russia last invaded Ukraine in 2014. History shows market volatility was around 45 days. Markets quickly recovered after the last invasion, as well as from the Ebola scare that happened not long after.”
Stivers also states that earnings and growth drive the market. “While the news cycle and other major events can affect returns, it’s important to remember, fundamentals run the show.”
Stivers suggests people to use the market dip to their advantage. “In a 401(k), use market volatility to continue contributing (or contribute more), essentially buying when stocks are on-sale. You’ll essentially dollar-cost average in at lower price points.”
Stivers also wants people to remember that timing the market is risky. “Don’t overreact to the conflict and what it’s doing to Wall Street. Trying to time the market based on that type of risk is a fool’s errand, especially within a 401(k). You’ll almost assuredly miss the bounce back while absorbing much of the losses.”
Should people with a 401(k) be worried?
Stivers says, “For investors who don’t check their 401k’s on a regular and rely on quarterly mailed statements, it is likely that they will have quite a shock when opening their 2022 first quarter statements. Depending upon your investment mix the decline in value could be 10% or more by the end of March. So it is natural to be concerned about our 401k’s in this volatile market that is partially a result of the Russia-Ukraine crisis.”
Stivers advice for 401(k) holders would be, “to have a long-term perspective when investing in the stock market. When [my clients’] 401ks are down due to world events or economic conditions, it is not the time to panic and sell at a loss. During the financial crisis of 2008 the S&P 500 dropped over 38%. For those who panicked and got out of the stock market they took what we call a “paper” loss and turned it into a “real” loss. But for those who kept their-long term perspective over the next few years they not only made up their losses but entered a record “Bull” market that lasted until 2020 and dramatically increased the value of their 401ks.”