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Your portfolio, whether in a 401(k), IRA or brokerage account, is almost certainly in the red year-to-date after the precipitous stock plunge over the past week following President Trump’s announcement of his tariffs regime.

If you also have bonds and cash in your portfolio, the good news is that you likely lost much less than you would have otherwise. The same goes if you had some exposure to non-US equities, which have outperformed domestic stocks this year, even though they, too, got hit in the past week.

Sure, “losing less” hardly feels like “winning.” And your pile is still smaller – at least on paper for now.

But losing less than you might have should provide a little comfort since the stock market will go through bear markets and near-bear markets many times in every investor’s life. Having a diversified portfolio will almost always reduce your portfolio’s risk and volatility.

“This is a great time for younger people to learn a lesson for the next four to five decades. These market moves have happened before and will happen again. It’s what markets do,” said Brian Kearns, a certified financial planner and registered investment advisor.

In the near term, markets will remain on a knife’s edge, with stocks likely to bounce back at times on any perceived good news or traders’ sense that stocks may have been oversold. On Monday morning, for instance, stocks quickly but briefly gained ground after someone posted, falsely, that Trump would consider a 90-day pause in tariffs.

So, what to do now? Here is some perspective and advice from financial experts.

Diversified portfolios do well over time

Mainstream economists, investors and CEOs are having a hard time making economic sense of what Trump is doing with his punitive tariffs. That’s why there’s no guarantee as to how they will affect stocks in the long run.

But the going assumption is that stocks, as they have over the past century, will eventually bounce back.

Over the long run, they have provided solid returns for investors that far outpaced inflation.

So do a diversified mix of investments. Take the 60/40 portfolio – with 60% in stocks and 40% in fixed-income assets like government and corporate bonds. Typically, when stocks do poorly, bonds do better.

Even though the 60/40 portfolio has had some bad single-year performances – it got hammered in 2022, for example – over time, it has offered a lot of ballast for investors.

From 1901 through 2022, the median return of a US-based 60/40 portfolio was 6.4%, and when measured over 10-year rolling periods, it was 5.81%, according to a study from the Chartered Financial Analyst Institute.

“The long-term stability of the 60/40 portfolio in the United States has been noteworthy, mainly because of the market’s strong resilience and recovery after significant downturns,” the authors wrote.

Beware of cashing out

If you’re ever tempted to cash out of equities when stocks are going haywire, know that such a move can be risky for two reasons.

First, selling when stocks are low locks in your losses. Since timing the market is impossible, you may re-enter after a recovery begins, potentially repurchasing what you used to own at a higher price.

Second, you may get too comfortable keeping the cash. Not only will it not grow nearly as much as equities in the long run, but you risk losing spending power if inflation increases, which is expected to happen under Trump’s tariffs.

Even if you can get a nominal rate of return that matches or outpaces inflation – say on a certificate of deposit – the tax you owe on the interest may erase that advantage.

“What is cash doing for you? Is there inflation? Absolutely. So what is your after-tax rate of return?” said CFP Frank Wong, a principal at W Wealth Strategies.

Take advantage of buying opportunities

Big stock declines can provide long-term buying opportunities. “If you went to the supermarket (last month) and tuna was $3 for two cans and now it’s $3 for 4 cans, what do you do? You buy more cans,” Wong said.

But that doesn’t mean you should do so indiscriminately when buying into stock indexes. “Wade in, don’t dive,” Kearns advised, noting that before the latest rout, stocks have been overvalued relative to the risk investors took to own them. Target-date funds in your 401(k) – which invest with an eye toward the year you are likely to retire – should do this kind of risk management for you.

Know when you’ll need your money

Most people under 50 have a long time before retirement, allowing them to invest more heavily in stocks. However, many people over 50 also have a long horizon during which to invest — potentially 15 to 30 years. That is because the majority of their savings will remain invested throughout much of their retirement, as they typically withdraw only small amounts annually to supplement income from Social Security and any pensions.

That said, for money you will need within the next five years, be very conservative, Wong advised. “Whatever you have now, I’d hold.” Ideally, you’d keep that money in short-term fixed income and high-yield savings so that it earns at least enough to keep pace with inflation.

Raise cash to cover one to two years of living expenses in retirement

Retirees and those within a few years of retirement should avoid selling any of their stock holdings when the market is down. Instead, you will want to have up to two years of cash to cover your living expenses on top of any fixed income payments you’ll get.

If you have to tap your current portfolio to raise that cash right now, “pull from assets that haven’t fallen a lot during this period – for example, high-quality bonds,” said Christine Benz, director of personal finance and retirement planning at Morningstar.

If you’re still working, she said, try to boost your savings. If you’re over 50, you’re entitled to make catch-up contributions in your 401(k). And those catch-up contribution limits are even higher if you’re in your early 60s.

Lastly, do a “budget audit” to see where you can reduce your spending, Benz recommends.

“In addition to boosting savings and building out your cash buckets, that strategy has an emotional ‘take control’ benefit. Having a tighter budget will help reduce portfolio withdrawals once retirement commences,” Benz said.

For retirees who are no longer saving, she also advises trying to adjust spending during market downturns. “That will leave more of their portfolios in place to recover when the market eventually does,” she noted.

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