3 Steps for Weathering Market Volatility


Successful retirement security comes from intelligent, all-weather portfolio construction and disciplined allocation and rebalancing. These bedrock principles hold especially true during times of volatility. Our time-tested approach remains the following:

1. Long-term approach: Financial markets move through cycles from good to bad and back. History has proven that the most prudent way to invest is to focus on the long term. Avoid the temptation to try to time the market. Your personal circumstances including your age, and risk tolerance based on factors such as investment temperament, marriage, children, divorce, or planned retirement should drive how you are invested. The best way to navigate inevitable market ups and downs is to have an investment plan that meets your goals, time horizon, and style—and that you can stick with.

2. Diversification: Emotions can get in the way of successful investing, tempting us to sell at market bottoms, and buy at tops. Balanced asset allocation derived from appropriate considerations of risk are the best way to weather all market environments. Target date portfolios, which are pre-diversified portfolios named using the year in which you expect to retire, can be a way to gain diversification and an appropriate allocation for your expected year of retirement.

3. Periodic Rebalancing: Rebalancing during times of market dislocation improves long-term returns and reduces undesired volatility. Rebalancing is bringing your portfolio back to your original asset allocation mix. This is necessary because over time some of your investments may become out of alignment with your investment goals. You’ll find that some of your investments will grow faster than others. By rebalancing, you’ll ensure that your portfolio does not overemphasize one or more asset categories, and you’ll return your portfolio to a comfortable level of risk. CRA periodically rebalances target date portfolios automatically, which is one of the key benefits for using CRA target date portfolios rather than attempting to assemble and manage a portfolio of individual funds on your own.

It can be frightening when financial markets are up and down. You may feel strong temptation to take action to stop the losses, but most often it is best to stay the course. A careful assessment of your individual risk tolerance, years to retirement, and investment allocation can help assure you are well-positioned for long-term retirement savings, regardless of temporary periods of market uncertainty.

To review your current investments and future allocations, please call 800.352.0313 or log into your account via cra-online.org.

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