The Washington PostDemocracy Dies in Darkness

Stock market sell-off shouldn’t change your retirement strategy

After a period of increases, the benchmark stock market indexes suddenly tanked last week. (Angela Weiss/AFP/Getty Images)

We’ve been here before.

The stock market takes a nosedive and then bounces back.

But then it drops again.

After a period of increases, the benchmark stock market indexes suddenly tanked last week, “slamming the brakes on a record-shattering run that had lifted Wall Street to new heights.”

During past drops, people panicked and jumped out of the market or they worried themselves sick wondering if they should bail.

Back in 1999, Fred Barbash, then the business editor for The Washington Post, addressed investors’ anxiety about the stock market after receiving a letter from a man who sold almost his entire portfolio after the Dow Jones industrial average plunged nearly 267 points. “I’m tired of this buy and hold bunk,” the man wrote.

“Sell if you must,” Barbash wrote. “But the swinging pendulum of the Dow should not be the dispositive factor in our decisions.”

And what happened to those stocks the investor sold?

They all went back up — and then some.

“I tell random passersby to make use of boring index funds and studiously ignore whatever’s happening this week or this month in the stock market,” Harold Pollack, the Helen Ross professor at the School of Social Service Administration at the University of Chicago, wrote in a PostEverything piece in March, a few weeks after the financial markets plunged as the coronavirus pandemic wreaked economic havoc across the globe.

The truth is nobody knows for certain what the stock market will do at any given hour or day. You cannot time the market. So, the best strategy is to develop a retirement plan and stick with it, ignoring the daily ups and downs, just as Pollack recommends.

During this pandemic, I’ve regularly checked in with financial professionals. For the investors still asking, “Should I stay or should I go,” I’d like to revisit this advice.

Q: I’m afraid of losing all my money. Can I lose everything?

A: “Every investment has risks, but different investments face different risks,” Ric Edelman, co-founder of Edelman Financial Engines, said in April when the markets were down. “Stocks suffer from market risk, as we’ve seen. Bonds suffer from interest rate risk. Foreign investments face currency risk. Even bank accounts have risk — tax risk and inflation risk. That’s the value of owning many different kinds of investments: It’s unlikely every risk will occur at the same time. Keep in mind market crashes aren’t permanent. After crashes occur, prices eventually rise, sometimes quickly (after the crash of ’87, it took only a couple of months) and sometimes slowly (after the crash of ’29, it took 15 years) — but usually a lot faster than slower. So don’t assume that a crash means you’ve permanently lost everything you had in stocks — unless you sell them while the prices are at their lowest.”

Q: What should I do if I have a decade or more to retire?

A: “Stocks are reliable if you have a time horizon of 10 years or longer,” Christine Benz, director of personal finance for Morningstar, said in early August. “When we look at Morningstar’s database for ‘rolling’ 10-year returns of the S&P 500 — meaning May 2010 to May 2020, June 2010 to June 2020 and so on — there have been 23 10-year periods when stocks are negative, out of 891 10-year observations since 1936. Most of those bad 10-year periods occurred during the last financial crisis, and most of the losses were quite small. The worst was March 1999 to March 2009, when the S&P 500 lost 3.42 percent on an annualized basis. Of course, there have been plenty of periods in modern market history when stocks were in the black but would have underperformed other asset classes, especially bonds. But starting bond yields are so low that it’s difficult to imagine that being the case going forward, at least for the next 10 years or so.”

Q: What if I’m retired or near retirement? What should I do?

A: “People who are drawing upon their portfolios in retirement, or for any other near-term goal, are usually better off keeping those near-term spending needs in the safe stuff — cash and bonds,” Benz said. “That’s because when we look at stocks’ rolling-period returns over shorter increments — say, three years or five years — stocks are too unreliable; the probability of loss — and in turn, the risk that you’d need to sell your stocks when they’re in a trough — is too high for comfort. That risk is arguably enhanced today given the comeback that stocks have mounted since bottoming in late March and given the pandemic and its related economic effects.”

Q: When the market goes down, is it a good time to invest?

A:Bear markets can be an ideal time to increase contributions to your workplace plan since you are buying cheaper shares,” Dan Keady, chief financial planning strategist at TIAA, said in March when the stock market was seeing daily declines. “This can benefit you when the market recovers. If you can, try to increase your contribution now, even if it is not intuitive.”

Q: Why is the market going down right now?

A: “We view the latest sell-off as a bout of profit-taking after a strong run,” Mark Haefele, UBS Global Wealth Management’s chief investment officer, wrote recently about drops in the stock market last week. “The S&P 500 enjoyed its strongest August in 34 hours, gaining 7 percent, and added a further 2.3 percent in the first two days of September, to reach a fresh record high. Stocks are still well-supported by a combination of Fed liquidity, attractive equity risk premiums, and an ongoing recovery as economies reopen from the lockdowns.”

Q: What should I do right now?

A: “First and foremost, we recommend staying invested according to your investment plan,” Haefele says. “Volatile markets can leave some investors stuck on the sidelines, waiting for greater clarity or cheaper equity prices. But rather than trying to time the market and potentially miss out on gains, we recommend an averaging-in approach by establishing a set schedule to commit capital to stocks within a 12-month time frame.”

Color of Money Online Chat

Join me on Thursday, Sept. 10, from noon to 1 p.m. (Eastern) for a real-time discussion about your money.

All you have to do is send in your written questions, and I’ll answer them during the one-hour online discussion.

Reader Question of the Week

If you have a personal finance or retirement question, send it to In the subject line, put “Question of the Week.”

Q: My son just graduated from college this past May and is job hunting in this terrible economy. He is a saver and has worked odd jobs throughout college and has substantial savings. He wants to learn about investing in the stock market — nothing big, just getting started. Any advice to give him about how to go about it now?

This week’s answer comes from Jacqueline Campbell, who formerly worked in banking and wealth management and now runs a Chicago-based financial adviser training firm that focuses on new and/or diverse financial professionals.

Campbell: My advice to young adults is to invest early and invest often. Just as this amazing young man was able to work odd jobs throughout college to amass substantial savings, that same discipline holds true as an investor. Having a consistent strategy that includes dollar-cost averaging is a great way to begin the investment journey. Investing the same amount on a consistent basis will help smooth the ride of the stock market and allow for a solid approach to building the foundation of a long-term portfolio. Lastly, I remind investors that we should never focus on timing the market, but it is “time in” the market that is the difference. Having a well-diversified portfolio that covers multiple asset classes with a clear investment objective and time frame is the key to becoming a wise investor. Also, understanding your tolerance for risk will help ensure our young investors not to panic when the markets pull back; however, because of the long runway in front of him, my advice is to start now and keep going!

Retirement Rants and Raves

I’m interested in your experiences or concerns about retirement or aging. You can rant or rave. Send your comments to Please include your name, city and state. In the subject line, put “Retirement Rants and Raves.”