You may be tempted to revisit your retirement investing strategy now that stocks are falling, but history shows those who get the best return on their money stay the course.
The Dow Jones Industrial Average dropped more than 800 points on Thursday in its biggest decline since June 11. The sell-off, accompanied by declines in the S&P 500 and Nasdaq Composite, was prompted by a downturn in tech stocks that continued to roil the markets Friday.
It was a sharp reversal from the new highs the S&P and Nasdaq reached earlier this week.
Research from J.P. Morgan Asset Management shows that the investors who have fared best in past market drops were those who left their retirement nest eggs alone.
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In fact, in the 20 years through the end of 2019, six of the 10 best days in the market occurred within two weeks of the 10 worst days, according to Katherine Roy, the firm's chief retirement strategist. The findings are based on the firm's own data combined with research from the Investment Company Institute.
"Most people react when negative things happen, and now, because things are happening so tightly together in terms of those rebound days, you're not able to get back in in time, nor do people have the courage to do so," Roy said. "So the best thing is to stay invested."
Data from the Great Recession shows that staying invested helped retirement accounts recover more quickly. For those who stayed in, account values fully bounced back within three years. Those with traditional allocations — such as 60% stocks, 40% bonds — fared particularly well, Roy noted.
The S&P 500 didn't get back to where it was until 2012, Roy said.
Besides staying invested, two other investor behaviors contributed to that upswing: continuing to contribute on a systematic basis and buying more as the market went down.
Other tips can help investors during market drops like this week's.