Commentary: Volatility has returned to U.S. stock markets with a vengeance. The Dow Jones Industrial Average has fluctuated by a thousand or more points on recent trading days. During these times your 401(k) plan participants can become very nervous. Plan sponsors and their investment advisers should help participants remain calm during these periods of intense market fluctuations by sharing the following:

  • Don't stop contributing. Participants often contact me during times when stock markets are falling so they can confirm that, “... now is a good time to stop making 401(k) contributions, right Bob?” Many participants wrongly believe that rising markets are good to invest in but falling markets are not. This situation presents a wonderful opportunity to discuss the merits of dollar cost averaging.
  • Resist the urge to sell. Many participants are pained to see the value of their accounts falling and feel the only way to stop the bleeding is to sell, before their investment falls even more. Realizing losses like this is a major reason why most participants average less than half of the return of the funds they are invested in. Reassure your participants that markets rise and fall and that they are long-term investors who should not be concerned about short-term market fluctuations.
  • Don't look at your account balance. If you know you will be upset by the loss in value of your 401(k) account, refrain from viewing your account balance on days the markets suffer large losses.
  • Get help if you need it. This is a good time to share your investment adviser’s contact information with participants. Encourage participants who are thinking about making any sort of change to their accounts to contact their adviser first.
  • Stick with your plan. Fast moving markets, either rising or falling, are not times during which major changes to saving and investment plans should be made. Emotions tend to color perceptions to a high degree during these times, leading to bad decision-making.
  • Volatile markets do not last forever. Nothing good or bad ever lasts forever. Although it may seem like this latest period of market declines will never end, it will likely be over sooner than most think. Riding out the storm is usually the best bet.

In short, participants should hang-on, hang in there and contact their adviser before making any changes.
Robert C. Lawton, AIF, CRPS is president of Lawton Retirement Plan Consultants, LLC, a RIA firm helping retirement plan sponsors with their investment, fiduciary, employee education and compliance responsibilities. He may be contacted at or 414.828.4015.

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