Staying on course toward your long-term goals can be especially challenging during periods of uncertainty, like we experienced in 2020. According to Canally, while it's nearly impossible to predict when the next market downturn or economic crisis may occur, we know that eventually one will. That makes it important to take steps now to ensure your portfolio is positioned to help you remain on track and ride out any storms that come your way.
Begin by reviewing your current asset allocation. That refers to how you have distributed your investment across different asset types, such as stocks, bonds and cash. Over time, market swings can throw your asset allocation—and potentially your risk targets and investment goals—out of balance. When this happens, you can rebalance by moving money from investments that take up a greater portion of your portfolio than desired into those that could use a boost—to get back to the initial (or target) asset allocation. While rebalancing doesn't protect against losses, it can help you stay on track to meet your goals.
"Reach out to your TIAA wealth advisor if you need help determining if and when your portfolio needs shoring up, so it remains aligned with your risk tolerance and long-term objectives," Canally said.
You also want to avoid drawing down on long-term assets when the market is in flux.
"These are assets you don't intend to use for 3 to 5 years or longer," Canally said. "Whether you are nearing or in retirement, it’s important to remember that you're still a long-term investor. You need your portfolio to continue generating income and growth throughout your time in retirement."
Remember that in a declining market, you still own the same number of shares. Even if the value of those shares have declined, the number of shares you own has not. As long as you remain invested, you preserve those shares and reduce potential losses, which is critical as the markets begin to recover.
Canally emphasizes that a well-defined, repeatable investment process focused on asset allocation and diversification can help you move forward with confidence in any market environment.
If you have questions about whether your portfolio is adequately diversified and allocated in a way that reflects your personal tolerance for risk, or if your risk parameters have changed, contact your TIAA wealth advisor to schedule time to talk about your concerns.