Between ever-increasing inflation, a shaky stock market, rising interest rates, and recession fears, many households might feel like their finances are in a precarious position.
But there’s a silver lining for investors in all the gloomy news of the past few months: the opportunity to buy during a stock market dip has been relatively rare over the past decade-plus.
“If you’ve got the availability to put more into your retirement savings, then by all means,” says Lori Gross, a financial and investment advisor at Outlook Financial Center in Troy, Ohio. “When the market is down low … you’re going to ride it back up. It’s just a matter of time.”
Young investors have, for the most part, experienced a stock market that’s only grown during the time they’ve been investing. And it’s easy to be bullish when you’ve only watched your 401(k) balance grow; less so when it looks like you’re losing money.
The past few months have been one of the first real tests many investors have had really understand their risk tolerance, says Gross, with the S&P 500 and NASDAQ indices falling by double digits. While stocks tanked at the start of the COVID-19 pandemic, they recovered in record time—and then soared.
“We go through cycles,” says Gross. “Everyone got really comfortable with the fact that the market was doing well. People don’t remember a time, back in 2008 and then 2001, that we had really bad markets.”
Typically, when the stock market falls, advisors and other financial experts give the same advice to those with years or decades until retirement: Don’t panic sell, keep investing, and stick to your financial plan. If anything, look at it as a buying opportunity, because you’re buying stocks at a lower price than you would have before. When the market goes back up, so does your net worth as your eventual gains compound (positive returns aren’t guaranteed, but historically the stock market has always trended up).
That advice still applies, but there are a few exceptions. Gross says it doesn’t necessarily work if you decided on your investment strategy without experiencing a true market low. The past few months—for those paying attention to financial news—have been a decent test of an investor’s mettle. If you checked your 401(k) balance in the past few weeks and are worried about your investments, then it might make sense to rethink your asset allocation going forward.
Any appeal of a down market depends on your age and your investing time horizon. For younger investors, it’s an opportunity to buy some discounted stocks. But those near retirement may not have the time left to watch their investments rebound. That said, they should have transitioned already to a more conservative asset allocation, which should help them barrel through this downturn, says Gross.
If you don’t think you can simply sit idly by and do nothing, Gross recommends taking the time to acquaint yourself with the investments in your portfolio: Learn about the funds you’re putting money into—their exposure, associated fees, etc.—and research if there are potentially better options available.
All this said, if you’re worried that the down market could signal an impending recession and want to shore up your emergency fund, it’s okay to reduce contributions to a retirement account for a little while, Gross says, until you feel comfortable that you can ride out any future shocks.
Just remember: Time in the market is more important than timing the market. The longer your money is invested, the more potential it has to grow thanks to compounding returns. If you dial back your contributions now, be sure to increase them once you’re on solid footing.
“People have been happy. They’ve been so comfortable that they’ve gotten complacent with understanding that the market will go down at some point,” says Gross. “And this won’t be the last time this happens.”
Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.
