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Market Volatility Communications Center

Market Volatility Communications Center

A resource for those saving and investing in a retirement account with Prudential

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Saving and investing for retirement during this time of extreme market volatility is stressful. That’s why we put together some info for you to help you learn more, understand your options, and take action.

What’s new?

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Hear our Prudential Retirement Counselors answer some of your frequently asked questions.

What should I do with my investments during this volatility?

Should I stop contributing to my retirement plan?

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I’m close to retirement, how should I be thinking?

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EXCLUSIVELY FOR SAVERS IN PRUDENTIAL RETIREMENT PLANS­

Schedule a Free Virtual Session with a Prudential Retirement Counselor

Questions about market volatility? We’re here for you.
Schedule a complimentary 30-minute online video session with a Prudential Retirement Counselor.

  • Get answers to your questions
  • Receive assistance for your goals
  • Learn what’s right for you

Click here to schedule your session.

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What’s happening with the markets?

There is a lot going on in the world and these events are influencing what's happening in the markets. If you're wondering how all of this impacts your retirement savings strategy, we're here for you. Keep reading for some helpful tips on how to manage during these turbulent times and keep your savings on track.

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What do I need to know?

Here are 5 things to consider when worried about market volatility:

 

1. Understand what market volatility really is (and means)

It might sound scary, but "volatility" simply refers to a change in prices. It's normal and happens over time — it's not necessarily a cause for panic, and it's something you should consider when developing your long-term strategy.

Think of it like weather: If we expect only sun, and base all our plans on that, we're setting ourselves up for failure because there's always a chance of rain.

Start by understanding that the prices of stocks and bonds will go up and down and there are some things you can do with that in mind. But even if market volatility catches you off guard, you can handle it.

 

2. Consider building a diversified portfolio

Diversification is a strategy that may help you with market volatility. The reason: Different kinds of investments can behave differently under similar conditions — they generally don't all go up or down at the same time. The result can be less volatility in a diversified portfolio even during times of volatility.1 Just remember that investing involves risk, and it’s possible to lose money. Also, asset allocation and diversification do not ensure a profit or protect against loss in declining markets.

To diversify, you would choose an appropriate mix of investments, not only across the major asset classes like stocks and bonds but also within them (large-company growth stocks or intermediate-term government bonds, for example). Generally, holding more stocks means taking on more risk, but what's "appropriate" will be based on factors like:

• Your age

• Your goals

• Your time horizon (when you need to use the money you invest)

• Your emotional tolerance for risk

 

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Learn more about making an investment allocation change

 

3. Focus on time in the market (not market timing)

Long-term investing is about time in the market, not timing the market.

That's because no one knows exactly when the right time is to buy or sell. Besides, research shows that investors who try to time the market — buying low and selling high — usually fare worse than those who contribute regularly and stay invested for the long run. Historically, the market's biggest gains have come on a relative handful of days; if you're not invested on those days, it's very hard to make up for the missed opportunities.

That's why it's important to keep a long-term perspective. You invest to help secure the future you want — probably 10, 20 or even 40 years down the road. Even what feels like a big bump today will likely be a radar blip decades from now.

Consider: If you own a home, and someone told you its value went down this year, would you panic and sell? Likely, you wouldn’t. You bought your house because you knew you'd be there a while, so its day-to-day price isn't as important. Chances are your home's value will rise over time and that's what you are focusing on.

Look ahead, not back.

 

4. Rebalance your portfolio

In order to maintain a properly diversified portfolio, you should consider rebalancing it. The reason: Since different parts of your portfolio behave in different ways, eventually your asset allocation will likely drift away from your original target2. Most financial professionals suggest reviewing your portfolio at least once a year to make sure it still meets your goals and risk tolerance.

Let's say you start with 80% stock funds and 20% bond funds. Then, over the next year, your equities' (stocks') value rises so much, they end up accounting for 85% or even 90% of your portfolio.

Not bad — but also more risk than your strategy called for. This is where rebalancing comes in: You might want to sell enough stocks (and/or buy enough bonds) to get back to your 80/20 target balance.

 

Learn more about updating your holdings

 

5. The right move could be nothing at all

It might sound counterintuitive, but during periods of market volatility, your right course of action might be to take no action.

The reason: Unloading an investment that’s worth less than you paid for it turns a “paper” loss into a real one. And that can have consequences you didn’t intend. So before you make a move, it pays to understand the concept of “unrealized” and “realized” losses (or gains) and how they might affect your finances.

When you invest in stocks — through individual companies or through mutual funds or ETFs — you buy shares. The value of those shares can change for a variety of reasons. But in general, when broad swaths of the market rise or fall, those shares follow suit.

While you own those shares, any gains or losses you experience are “unrealized” — they show up on your statement, but not in your bank account. They’re not exactly meaningless. But other than affecting your ability to borrow against them (if you have a “margin” account at a brokerage), and maybe your stress level, they don’t mean much in the long run — you’re still invested, and your investment could still rise (or fall) in value. But once you sell, you “lock in” your losses (or gains) and they become “realized.” Besides getting paid, in the short term that means you’ll owe federal capital gains tax (if you made money) or can deduct the loss when you file your tax return.

Long-term, the sale could have a much bigger effect on your financial health. If you’re investing for a far-away goal like college or retirement, your investment won’t be there for the rebound. That’s important to know because, historically, the market’s best returns have come on a relative handful of days. If you miss those, your losses will be even harder to make up.

Acting on emotion may lead to irrational decisions — and hard lessons. If you develop a sound strategy and consider sticking to it, you'll likely be in a better position to pursue your financial goals.

 

 

 

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1Just remember that investing involves risk and it is possible to lose money. Asset allocation and diversification do not guarantee profit or protect against loss in declining markets.

2 Most financial professionals suggest reviewing your portfolio at least once a year to make sure it still meets your goals and risk tolerance.

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How can I make a change to my retirement account?

Transfer Current Money

What it does

Moves money between available investments. You can transfer manually or let us automatically rebalance it for you.

What it doesn't do

Does not change your future allocations.

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Allocate Future Investments

What it does

Updates where the contributions from your paycheck are invested.

What it doesn't do

Does not move money that is already in your account.

Change Contributions

What it does

Sets up how much you will contribute from each paycheck towards your retirement savings.

What it doesn't do

Does not change any of your investments.

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Reading List

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To sell or not to sell? That’s the question in a failing stock market

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How to lower anxiety during market turmoil

How can I guard against losses? 

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This material is intended to provide information only. This material is not intended as advice or recommendation about investing or managing your retirement savings. By sharing this information, Prudential Retirement® is not acting as your fiduciary as defined by the Department of Labor or otherwise. If you need investment advice, please consult with a qualified professional.

Retirement Counselors are registered representatives of Prudential Investment Management Services LLC (PIMS), Newark, NJ, a Prudential Financial company.

© 2020 Prudential Financial, Inc. and its related entities. Prudential, the Prudential logo, and the Rock symbols are service marks of Prudential Financial, Inc., and its related entities, registered in many jurisdictions worldwide.

Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, CT or its affiliates. PRIAC is a Prudential Financial company.

For Compliance Use Only:1032972-00001-00

 

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