Be proactive to help maintain financial stability among your investments.

As retirement nears, investors must shift from wealth accumulation to wealth preservation. Market volatility poses risks, making it essential to implement strategies that protect portfolios while maintaining long-term growth potential.

The Impact of Market Volatility

Market fluctuations are inevitable, but they are particularly concerning for retirees who rely on investments for income. Sequence-of-returns risk – the danger of experiencing market downturns early in retirement – can deplete savings faster.

For example, withdrawing from investments that have lost value locks in losses, reducing recovery potential. Developing a risk-mitigation strategy is crucial.

Adjusting Asset Allocation

One way to manage volatility is by adjusting asset allocation. While younger investors may prioritize growth, retirees should balance risk and stability.

A bucket strategy can help:

  • Short-term bucket: Holds cash and short-term bonds to cover 2-3 years of expenses, providing liquidity during downturns.
  • Intermediate-term bucket: Includes bonds and dividend-paying stocks for stable income.
  • Long-term bucket: Contains growth-oriented investments, such as equities, to preserve purchasing power.

Diversification and Withdrawal Strategies

A well-diversified portfolio reduces exposure to market downturns. Investors should allocate assets across stocks, bonds, real estate, and alternative investments to mitigate risk.

Adopting a safe withdrawal strategy, such as the 4% rule or dynamic withdrawal methods that adjust based on market conditions, helps prevent premature depletion of funds.

Hedging Strategies

  • Annuities: Provide guaranteed lifetime income, reducing market dependency.
  • Dividend Stocks and Bonds: Offer steady income regardless of market fluctuations.
  • Tax-Loss Harvesting: Offsets taxable gains, reducing overall tax liabilities.

The Value of Financial Advice

A financial advisor can customize an investment strategy based on your risk tolerance, income needs, and market conditions. Regular portfolio reviews ensure adjustments align with evolving financial goals.

By proactively managing market volatility, retirees can maintain financial stability while ensuring their investments continue to grow for decades to come.

 

Copyright © 2025 FMeX. All rights reserved. Distributed by Financial Media Exchange.
Ethos Capital Management, Inc. (ECM) is a registered investment adviser. The firm only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Commentary should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author on the date of publication and are subject to change. The information presented does not involve the rendering of personalized investment and should not be viewed as an offer to buy or sell any securities discussed. Articles were prepared by a third party and were distributed by Financial Media Exchange, which is not affiliated with ECM. All investment strategies have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. Historical performance returns for investment indexes and/or categories, usually do not deduct transaction and/or custodial charges or an advisory fee, which would decrease historical performance results. Returns do not reflect the performance of ECM or any of its advisory clients. There are no assurances that a portfolio will match or exceed any particular benchmark. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. The tax information provided is general in should not be construed as legal or tax advice. Information is derived from sources deemed to be reliable. Always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules and regulations are subject to change at any time.
Post Views: 17