The US stock market is experiencing a significant downturn in response to President Donald Trump’s tariffs, leaving investors feeling anxious about their 401(k) investments. However, experts suggest that panic selling can lead to long-term financial losses.
Christine Benz, director of personal finance and retirement planning at Morningstar, advises young investors with decades ahead of them until retirement to take a step back, reevaluate their portfolio, and avoid making rash decisions. Selling off investments in the 401(k) or IRA could result in penalties and tax hits.
Benz also warns against shifting out of stocks entirely, as this can lead to missing future rebounds. Instead, investors should focus on broad diversification across markets and sectors. According to Hartford Funds, most gains occur during bear markets or the first two months of bull markets, making it essential for young investors to ride out dips.
Vanguard and other financial experts agree that staying the course and following a long-term investment strategy is crucial during uncertain times. Mark Hamrick, senior economic analyst at Bankrate, advises investors to buckle up for more volatility and potential further declines beyond today.
Experts suggest diversifying into international stocks and bonds as a way to soften the blow of market downturns. Investing in a Roth IRA or converting traditional IRAs to Roth IRAs can also be beneficial, especially when tax laws are favorable.
Additionally, advisors recommend using buffer ETFs to reduce volatility while allowing for growth, although these funds often come with high fees. Finally, focusing on what you can control – your budget and savings – can provide peace of mind during uncertain economic times.
Investors should prioritize long-term financial goals over short-term market fluctuations and avoid making hasty decisions based on policy announcements or deadlines.
Source: https://fortune.com/2025/04/04/the-stock-market-is-crashing-heres-what-financial-experts-say-you-should-do-now