Ordinary investors watching the market may wonder about how much damage the rocky market might do to their 401(k). It’s impossible to know what will happen next, but fund managers and financial advisers say it’s generally a good time to find out where you stand and make sure you’re sticking to your long-term investing plans.
If you’ve strayed from your original plan, it might make sense to rebalance your portfolio. Here’s what you need to know:
Q. What is a correction? Should I be worried?
A. A correction is the technical term for what happens when stock markets fall at least 10 percent below a recent high. A bear market is what happens when stocks are at least 20 percent below that peak. The Dow reached correction levels on Friday and the Standard & Poor’s 500 index temporarily entered correction territory Monday.
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Q. What should I do?
A. It’s a good time to look at your portfolio to see where you are invested, advisers say. But don’t make any changes that would take you away from your long-term plan. Know how much of your portfolio is invested in stocks versus bonds. You should also find out how much of your portfolio is invested in U.S. equities, compared to stocks from emerging markets and Europe.
Q. Does this mean I should be selling stocks?
A. If you find out your portfolio is out of whack, it can be a good time to come back to your long-term investing plans. But don’t rethink your entire plan because of today’s volatility.