Ignore the News, Your 401(k) Can Still Rise

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Is the declining market making you skittish about checking your 401(k)? Call it 401(k) update avoidance syndrome.

Investors hoping for strong returns might feel a little gloomy when they look at quarterly results for their retirement accounts. No surprise there. The stock market has been taking a hit and, by default, portfolio returns for retirement accounts are suffering.

But, there’s good news. If you’re buying, you’re buying low.

If you have a retirement account, lower fund prices means a lower dollar-value cost to buy into mutual funds. Depending on your portfolio allocation, a percentage of the money that you contribute each month to your 401(k) (or retirement account) may be used to purchase mutual funds. And lowered prices create a buyers market. For homeowners and shoppers alike, this recognizable phrase means there is a plethora of purchasing opportunities.

And, to cut to the chase, this means that a fund with a high price during the recent bullish market may now be selling for less. (For example, a fund like the Presidio (PRSDX) may see a decline in its Net Asset Value, the dollar value of a share in the fund, from a year ago. So, buying the Morningstar 5-star-rated fund might be a little easier on your wallet these days.)

You may be losing money now, but one thing’s basically certain –a down market does not last forever. Fretters have spent much time and energy expounding on whether we’re in a recession. And, let’s face it, the definition of recession makes it hard to know whether the United States is currently experiencing the “R” word, because economic downturn has to be measured over a period of time. That means people often don’t know there is a recession until we're in the middle of it. But, there are some advantages to the market we’re currently experiencing.

Think using a long-term timeline. “That let’s you put together a portfolio that has the best chance of success, regardless of what the future holds,” says Stuart Ritter, a certified financial planner for T. Rowe Price in Baltimore. Your portfolio “should not be based on how you felt when you read the latest headlines.”