What you should do with your 401(k) in a highly volatile market

For individual investors, the quick-turn global rout in stocks on Monday was unsettling, despite news Tuesday that stocks staged a rally.

For individual investors, the quick-turn global rout in stocks on Monday was unsettling, despite news Tuesday that stocks staged a rally. Also unwelcome: Expectations that volatility will continue for the foreseeable future. Investment strategists at retirement investment advisory firm TIAA expect it to last at least through the presidential election, said Doug Ornstein, a director on TIAA’s wealth management team. That’s thanks to uncertainty around the presidential election outcome, concern about interest rates and economic factors like jobless claims, as well as geopolitical risks. But if you’re investing in a 401(k), daily market dramas are no reason to take dramatic actions with your portfolio. Not only are down days and periods of volatility normal, they can create good buying opportunities for the managers of the funds in which you’re invested. “It’s important to remember pockets of opportunity are always on the other side of the storm,” Quincy Krosby, chief global strategist at LPL Financial, said in a statement. Andy Smith, executive director of financial planning at Edelman Financial Engines, puts it this way: “Separate your emotion from your money. There will be days when the market is up and days when it’s down. Focus on your time in the market rather than trying to time the market.” His point: It’s impossible to know the best time to get out of the market and then the best time to get back in. What’s more, Ornstein said, “Typically, the best days in the market follow the worst days.” Over the past 20 years, he added, if you had stayed fully invested in the market throughout, your average annual returns would be nearly twice what they would have been had you missed the 10 best days.