When you are investing for the future, the important thing is to stay the course. Remember, even if the value of your investment declines, you haven’t actually lost anything until you cash out. Your loss is what is called a “paper loss.” It is only on paper—it doesn’t become a real loss until you sell and receive less money than originally invested. Depending on how close you are to retirement, it may be a good idea to discuss your personal situation with your tax advisor.

1. Should I stop saving in the Plan?

Of course, that is one option, but if you stop saving in the plan, you will stop earning company matching contributions—free money going into your account every time you make a contribution. In addition, if you stop investing new money in your account when the market is down, you may be missing out on bargain stock prices.

2. Should I transfer all my investments out of stocks?

The stock market generally moves in cycles of growth and decline, and the recent market decline is nothing that hasn’t happened before. During a declining (“bear”) market, investors lose faith in the market as a whole—which in turn decreases the demand for stocks. Keep in mind that a sustained bear market is nothing new. The stock market and economy go through periods of growth and decline. And, in the past, the stock market has risen more than it has declined. While past performance does not guarantee the future, the following figures give examples of how the market has responded to past financial crises:

Source: Bloomberg

So before you rush to sell your stocks or avoid investing all together, consider what you stand to lose when the market bounces back and keep in mind two time-tested lessons.

• Develop a plan—and stick with it. A diversified portfolio that includes stocks, bonds and cash equivalent investments is a good idea for many investors. That is because having a mix of investments can help insulate your total portfolio against the impact of a decline in one particular investment or type of investment. During times of economic instability, it can be tempting to shift investments out of stocks and into more stable and conservative investments. However, if you do, you may sacrifice long-term growth potential since conservative investments historically provide lower returns than stocks over the long term. A better idea may be to stick with your long-term asset allocation model and hold a diversified mix of investments. By holding some bond and cash equivalent investments along with stock investments, you can help reduce your overall risk while retaining growth potential.
• Avoid “chasing” returns. During times of volatility, it may be tempting to try to “time” the market—to purchase investments when their market value is down and sell them when their market value is high. In practice, however, market timing success is difficult to achieve. Individual investors who attempt it typically find that they cannot time their moves accurately. In the long run, this strategy generally does not pan out as well as simply riding out uncertain times. Also, history has shown that transferring money quickly in response to a downturn may cause you to miss out on gains that come about as the market rebounds.

4. I feel like I need to do something. What can I do?

If you’ve reviewed your investment strategy within the last several months and adjusted your investments based on your investment timeline, it’s important that you don’t panic or take actions that may jeopardize your strategy.

If you haven’t reviewed your investment strategy and adjusted your investments lately, now is a good time to do so. 

If you feel like you want to take a more hands-off approach to investing, consider the Northrop Grumman Retirement Path portfolios. Each Retirement Path portfolio is actively managed by an independent investment professional and is:

• Targeted to a specific retirement date. All you have to do is choose the portfolio that’s closest to the year you plan to retire or begin to withdraw your money.
• Broadly diversified. Your money is allocated among a wide range of investments from several different asset classes to help minimize your risk.
• Adjusted over time. Over time, the investment mix of your selected Retirement Path portfolio is adjusted to reflect your changing objectives—slowly moving from an aggressive investment strategy when retirement is many years away to a conservative strategy as retirement approaches.

Your choices about your ongoing Savings Plan participation require a great deal of thought and will depend on several factors, such as your age, risk tolerance and years until retirement, among others. Before deciding to make changes, learn as much as you can. You also may want to speak with a financial advisor, especially if you’re getting close to retirement, before making any investment decisions.