Many investors — ministers and church staff members included — have retirement money socked away in mutual funds that include stocks.
After last year’s steady growth in the stock market, the first two months of 2018 left many investors feeling nervous but financial advisers suggest calm rather than panic.
“For the seasoned investor the recent volatility in the stock market is not unexpected,” said Barry Bledsoe, president of The Baptist Foundation of Alabama.
The lack of volatility in 2017 was historically low, Bledsoe said, with record highs in the market and 12 consecutive months of growth. Dips in stock prices were bound to come, Bledsoe said, but those who maintain a long-term perspective will be fine.
“From an investor’s point of view, one should always remember the goals of retirement investments should include careful attention to one’s particular time horizon and risk tolerance,” Bledsoe said. “Market volatility is a reality of investing and one should not have more exposure to the stock market than necessary to reach their personal financial objectives.”
As investors approach retirement, a general strategy is that investments should be reallocated to reduce the risk of major losses. Those decisions are based on many factors, including diversification, individual financial objectives and time until retirement. But investment decisions should not be based on daily activity in the market, Bledsoe said.
Thoughtful strategy
“Daily and monthly news about the markets are just a small part of a thoughtful investment strategy,” he said.
David Spika, chief strategic investment officer for GuideStone Financial Resources of the Southern Baptist Convention, said this period of growth in U.S. stocks has been the longest in history without some correction. He also advises calm, noting that in Britain, those who stayed calm during the panic after the Brexit vote rebounded well financially.
“2018 may be choppy for investors but long-term investors should focus on their long-term objectives and not on the minute-by-minute headlines scrolling by,” Spika said.
The same recommendations that guide investors in the corporate world should guide ministry leaders in their investment decisions. GuideStone President O.S. Hawkins said investors should keep four principles in mind:
- Always focus on your long-term objectives, not your emotions. Specifically regarding retirement participants, these assets are to serve your needs for a long period of time. Make sure your objectives and actions are consistent with your time horizon.
- Avoid making impulsive decisions. “Guard against making ad-hoc or emotion-driven changes in your portfolio,” Hawkins said. “Making changes based on short-term market moves is almost a guarantee for failure as it promotes buying high and selling low.” The performance of your account moving forward will be determined based on results of the financial markets in the future, not the past. A sell-off today cannot regain the losses of yesterday.
Consistent contributions
- Don’t count losses (or gains). Consistent contributions to a retirement plan afford investors a systematic way of taking advantage of investment opportunities as markets ebb and flow.
- Maintain realistic expectations about market behavior. Financial markets in the short term tend to fluctuate in response to social, political and economic events. However, historically, the markets stabilize and return to profitability over the long term, focusing on the underlying fundamentals. “Historically, the markets have been favorable to those with a long-term view,” Hawkins said.
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