Answering your questions about market volatility

If you have investments and you faithfully continue to invest, you know (and expect) the markets will go up and down over time. It’s the nature of the beast. But when the markets have bigger swings up and down, it can make you a little uneasy. We understand that. Money and emotions are closely tied.

We know many of you have questions right now. And while each person’s situation can be a little different, we want to help by answering some of the most common ones we’ve heard from you.

Market-related questions

Should I take money out of the market now? Should I stop contributing to my retirement savings and wait to invest?
During volatile times, it can be tempting to change how you invest in hopes of a better return. In the long run, you’re generally better off staying the course rather than trying to jump out of, then back into, the market.

How much further can the market go down?
No one knows that. But in the last 150 years around the world, we’ve been through wars, pandemics, and political changes. What happened with each downturn? The market met its floor and recovered. You never know what that floor will be until it’s turned around, but you can look back at trends.

How long will it be before the market recovers?
Even the worst market declines have generally been followed by a significant recovery. Did you know that one year after the market dropped in 2008/2009, it rebounded by 53.5%?1

Is there a chance I could lose a majority of my retirement savings?
It’s not likely, but as an investor, it’s always good to use times like this to revisit the types of investments you hold. Asset allocation (holding different asset classes that don’t typically move in tandem with one another) can help mitigate some of the risk of a falling market. Since we’ve been on an upward trend for more than 10 years, it’s likely your portfolio may need some reallocation.

How do I know if I’m invested the way I should be?
First, make sure your portfolio is diversified and continues to be in line with your long-term goal. Saving for retirement generally requires you to trade near-term gains for what may be long-term benefits. Having a goal and sticking with it may help you keep perspective during ups and downs.

If your portfolio diversification is still lined up with your goals and your time horizon is longer than five years, then you likely don’t need to make changes and can ride out the market volatility. If not, then realigning based on your goals, risk tolerance, and how long until you’ll need the money will help you achieve long-term success.

Investment-related questions

If the market continues to fall, when should I move to cash or cash equivalents? Or invest more in fixed income? Should I move to “safer” options?
What’s best for you really depends on your goals, risk tolerance, and how long it will be before you need to withdraw the money. If you’re bailing out of your investments when the market is falling—financially, the worst time to sell—then you may want to limit your exposure to stocks. Sticking with a more conservative portfolio (fixed income/bonds) may earn you more in the long run than trying to time the market in an aggressive portfolio that’s mismatched to your risk tolerance.

How do I know my risk tolerance?
It’s good to know you have the right investment mix based on your comfort with risk and how long you have until you need your assets. When you know how much risk you’re willing to take, you’ll better understand how much reward you could expect.

I’d like help from a financial consultant. How do I find one?
A financial consultant can help you plan and deal with the ups and downs of the market, and update or create a personalized financial plan. We can help connect you to one for assistance.


1 Instances of high double-digit returns were achieved primarily during favorable market conditions and may not be sustainable over time. Past performance is not a guarantee of future results. Source: Wilshire Compass. Reflects S&P 500® Index returns. The S&P 500 is an unmanaged index and investors cannot invest directly in an index.

This document is intended to be educational in nature and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell Principal Asset Management Berhad’s investment products. Investing involves risk, including possible loss of principal. Asset allocation and diversification do not ensure profit or guarantee protect against a loss.