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Stock market plunges, should you move your 401k?

Posted: 5:00 PM, Jan 20, 2016
Updated: 2016-01-21 00:12:53Z

After the Dow took another plunge Wednesday, some experts claim 2016 is the worst start to a new year in the history of the stock market. So, what should investors do? According to local experts, likely nothing.

Experts say don’t panic!

"When the market takes a hit like this, it's a chance to buy low, and when you're making contributions to 401(k)s and retirement plans you're buying at these lower prices and the hope is that it will rebound at some point in the future,” said University of Missouri-Kansas City Finance Professor Nathan Mauck.

The one caveat

According to Mauck, the only time someone should consider making changes to their portfolio during a bear market is if someone is nearing retirement. However, even at that stage, they should have their portfolio allocated in less riskier investments in order to avoid losing a tremendous amount of money.

"People move into fixed income like bonds, you can also move into ultra-safe investments like maybe U.S. treasuries, saving accounts, CDs, things that are guaranteed deposits that earn very low rates but also won't lose value. Those make sense for those getting closer to retirement,” said Mauck.

What’s causing the instability?

There are many theories, but Mauck, along with Peter Mallouk, who is president of the wealth management firm Creative Planning in Leawood, Kan., agree that two primary factors are slowed growth in China and the 13-year low in oil prices.

"If you saw somebody six months ago and they lost 70 percent of their weight, you're going, 'Oh my God. What's wrong? What in the world just happened?' That's what just happened with oil prices,” said Mallouk.

Mauck said, "China had been driving a lot of growth by demanding more and more goods and obviously producing a lot of goods. And as that growth slows, the whole global economy feels that."

How to allocate based on your age

Essentially, the closer you are to retirement, the more you want to stay away from stocks and other risky investments.
 

 

"The market will bounce back. When is another question,” said Mauck.

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