Four Fortifications for Your Retirement in a Volatile Stock Market

In 2022, the U.S. stock market was lower for the year when the midpoint rolled around.  That is the first time in a long time. The broad-based Standard & Poor’s (S&P) 500 index fell more than 20% in the first six months of 2022, placing it in what is called “bear market territory.” 

Stocks are volatile investments whose value always rises and falls. The periodic occurrence of bear markets is part of being a stock market investor. That does not change the fact that your retirement funds may have taken a hit during this year—and that’s not easy to see! 

It’s perfectly natural to want to “fortify” your retirement against stock market volatility. Much of what is written in the popular press is very short-term in its orientation and probably ill-advised. From our 50+ years of helping families plan for and live through retirement, we here share ways to intelligently fortify your long-run portfolio positioning.



This article shares tips, including:

  1. How sensible diversifying of your portfolio to protect your equity
  2. What should trigger a review of your asset allocation
  3. Why discipline is an essential aspect of investing
  4. Devising a long-term financial plan to help your portfolio


1. What is Sensible Diversification of Your Retirement Portfolio? 

The old adage, “Don’t put all your eggs in one basket,” certainly can be applied to the stock market. If your retirement portfolio represents the substantial majority of your available investment assets, you might be prudent to start with the assumption that you don’t want your retirement portfolio to be solely invested in stocks.  (If you are very young, with many years to retirement, you might be an exception to this guideline.)  For most people, diversification (investing in different asset types) is a potentially safer and more stable approach. 

This ensures that, when the stock market drops, you also have money in other types of investments, which may not take a similar hit in the short-term. Typically, the other asset classes in retirement portfolios are bonds and cash. 

Bonds provide much more principal stability than stocks, although the principal can still fluctuate a bit (generally inversely with the movement of interest rates). Bonds also provide cash returns from interest payments. Allocating some percentage of your retirement assets to Cash will ensure a stable way to maintain your principal, but you likely won’t earn very much interest or experience any capital appreciation.

Some retirement portfolios are also invested in alternative investments, such as real estate, precious metals, or even hard assets such as commodities. Talk to your Atlanta financial advisor about your asset allocations to maximize your protection against stock market risk. Getting the allocation right should be based on a good long-run plan (see #5 below).


2. Reviewing Your Asset Allocation 

It’s important to review your asset allocation periodically, at least once a year. However, even two or three times annually may be advisable. Why?  The first answer is that it may be appropriate to “rebalance” your portfolio to keep it aligned with your allocation plan.  A simple example from 2022 will show why this is so.  

Assume you started the year with a retirement portfolio of $500,000 and your diversified asset allocation guideline was 50% stocks ($250,000), 40% bonds ($200,000), and 10% cash ($50,000).  As of mid-year, your stocks might have declined 20% from $250,000 down to $200,000.  With interest rates having risen, your bonds might be down 5% as well, from $200,000 to $190,000.  Your 10% in cash, or $50,000, was likely unchanged.  Diversification meant your total retirement portfolio was down 10% to $450,000.  But your stocks are no longer 50%.  Because they declined the most, they are down to around 44% of the total “pie”.  Rebalancing would mean you sell enough of your bonds and cash investments to add to your stocks and bring them back up to 50% of the lower amount, or $225,000 of the $450,000.  This rebalancing is a “Sell High – Buy Low” discipline that means you’ve added to your stock investments when they were lower in price or “on sale.” 

Secondly, your risk tolerance may fluctuate. Risk tolerance is defined as “the degree of risk that an investor is willing to endure given the volatility” in the investment. This is unlikely to happen 2 or 3 times a year, but over the course of your investing lifetime, your risk tolerance may indeed change.

Yours can change with multiple varying factors. One of them is your age. If you are 64, and set to retire next year, your risk tolerance for stock market volatility is likely to be lower than if you are 25 and just began investing. At 25, you have decades to reap the benefits of stock market appreciation, even given periodic bear markets. At 64, you are preparing to begin living from the returns on your assets in the near future.

So, a bear market can derail your retirement plans if you’re in your mid-60s or older. It’s appropriate to be more balanced in your asset allocation than might have been the case when you were 25.  Other factors that can affect your risk tolerance are your job status, income, family structure, marriage, the birth of a child, a divorce, outside asset and income sources, et cetera. Any other factor that affects your income, expenses, and overall life situation significantly can be a factor. 

Your goals also have a major bearing on your asset allocation. Time horizon is probably the most important variable.  If you want to retire in 30 years, your asset allocation will be different from someone whose goal is to retire in five.  The nature of your planned retirement is also important.  Suppose your goal in retirement is to downsize and move to an area where the cost of living is much lower than where you currently live.  Your need to withdraw heavily from the portfolio is modest in comparison to someone who plans to travel and spend extensively. “Withdrawal rate” affects asset allocation.


Our Approach Isn’t Just Numbers—It’s About the Financial Life You Want

3. A Disciplined Approach is Essential in Investing 

Discussing your goals and portfolio planning with a pure fiduciary investment manager in Atlanta is a prudent step. But once you’ve discussed your objectives (and periodically reviewed them), the best planning in the world will not help you unless you stay disciplined over both the short and the long-terms. Don’t suddenly decide to sell because you look at your statements and see less in the funds than last month.  As our firm’s Chief Investment Officer, Ryan Patterson, CFP, CFA, likes to say, “Panic is not a strategy!”.

If you’ve committed to a long-term holding strategy as part of your plan, stay with it. This is a basic tenet of portfolio management. One of the worst investment decisions you can make is to panic and sell into a stock market decline. Historically, the U.S. stock market has bounced back from every bull market in the last century—and then continued upward.  By the time you feel like you need to sell, it is likely that most of the damage to your portfolio has already occurred.

If you panic-sell, you’ve eliminated your ability to benefit from the eventual upward rebound. Remember, as well: losses only exist on paper until you sell. When you sell, you’re locking a loss in, ensuring the loss of equity by falling prey to fear.


4. Long-term Retirement Planning 

For retirement or any other goal, stock market investing is not a short-term game.

For retirement or any other goal, stock market investing is not a short-term game. As a matter of fact, for short-term goals, other asset classes (like cash and bonds) should typically be the investments you look to. Despite attractive advertising claims, no one can time the market, so while the stock normally recovers, given time, no investor can assume that it will go up over the short-term. 

The good news is that over the long-term, it does typically rise. The S&P 500 index has returned at least 10% on average every year for the past 100 years (even when you factor in periodic market dips). Overall, that’s far more than recouping the returns on bonds and cash. 


Typically, inflation runs at roughly 2-3% annually (although it’s currently higher). The interest on U.S. bonds and cash, once adjusted for income tax impact, has been under the inflation rate for the past decade. So, over the long term, it is probable that only the stock market puts you ahead of inflation.


Consult with a Fiduciary Financial Planner 

So, what is there to do now?  When it comes to protecting your retirement savings, your optimal action may simply be consulting with an Atlanta fiduciary advisor. In fact, an investment manager can develop an individualized plan for you that may even lower your tax liability long-term (among other things). 

An individualized strategy takes into account your goals, your current age, the age at which you plan to retire, your risk tolerance, your projected retirement income (such as a pension or annuity), and more. At Linscomb & Williams, we even work with your present cash flow to maximize what you can currently contribute to your retirement and other goals. 

Find out how meeting with some of the longest-tenured and experienced financial planners Atlanta has could help you strengthen your retirement equation. Contact us today to discuss the current situation and your long-term plans.


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MaryJane M. LeCroy, CFP®

MaryJane M. LeCroy, CFP®

As a member of our Atlanta team, MaryJane M. LeCroy is a Managing Director and Senior Wealth Advisor for Linscomb & Williams.

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Investment Advisory Services are offered by Linscomb & Williams, an SEC registered investment adviser, and a subsidiary of Cadence Bank. Linscomb & Williams (L&W) provides financial planning, investment management, and retirement plan and investment consulting services. L&W is not an accounting firm, and does not provide tax, legal or accounting advice.

Information expressed herein is based upon opinions and views of L&W and information obtained from third-party sources that Linscomb & Williams believes to be reliable, but Linscomb & Williams makes no representation or warranty with respect to the accuracy or completeness of such information. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.