The stock market has taken a hit following President Trump’s announcement of his tariffs regime, leaving investors with significantly reduced portfolio values. However, it’s essential to keep things in perspective – the market will inevitably experience bear and near-bear markets throughout an investor’s life.
Diversified portfolios can help reduce risk and volatility, making them a crucial component of any long-term investment strategy. While the effects of Trump’s tariffs are uncertain, mainstream economists agree that stocks will eventually recover.
A balanced mix of investments is key to achieving solid returns over time. The 60/40 portfolio, consisting of 60% stocks and 40% fixed-income assets, has historically provided stable results despite single-year setbacks. Even in 2022, when the portfolio experienced significant losses, its median return was still 6.4% over a 10-year rolling period.
It’s crucial to avoid cashing out of equities during market downturns, as selling at low points can lock in losses and leave you with little to no growth potential. Instead, focus on buying opportunities that arise from big stock declines, but do so strategically through targeted investments like target-date funds.
When deciding how much to withdraw from your portfolio, consider your financial goals and risk tolerance. Those under 50 have more time to invest heavily in stocks, while those over 50 can continue investing for 15-30 years. However, if you need money within the next five years, prioritize short-term fixed income and high-yield savings.
Lastly, retirees should aim to save up to two years of living expenses and maintain a cash reserve on top of their fixed income payments. By doing so, they can reduce portfolio withdrawals once retirement commences and take control of their financial future.
Source: https://edition.cnn.com/2025/04/08/business/what-to-do-stock-market-drop/index.html