September’s market rout was rough.
The S&P 500 lost 9% of its value, pushing the index to new lows for 2022.
October started better, with one of the best days of the entire year on Monday. But it may take weeks or months to know if we’re in the clear.
If you’re looking at a downtrodden portfolio … what do you do? Where do you go from here?
We can’t make losses in our 401(k) plans disappear. But we can put ourselves in the best possible position to recover when things turn around.
Let’s make a game plan.
Step 1: Rebalance … but Review Your Portfolio Weights First
Standard asset allocation strategy tells you to rebalance once your asset class weights drift a little too far from target.
If your hypothetical 60/40 portfolio (60% stocks, 40% bonds) drifts into a 50/50 portfolio during a market slide, sell off some bonds and roll the proceeds into stocks to get back to your target.
Great! That’s solid advice.
But before you act on it, take a minute to review the weights to see if they still make sense.
Is 60/40 the right mix for you? Or at your age, would 50/50, 80/20 or some other mix work better for what you want to achieve?
And a note about the bonds…
Were you allocated to short- or long-term bonds? Where does it make more sense to be allocated today?
As I wrote recently in Money & Markets, short-term bonds yield more than most long-term bonds today and have much less risk due to rising interest rates.
By all means, use the recent market blowup as an opportunity to rebalance. But make sure you’re still comfortable with the weights.
Step 2: Look for Stock Deals
I’m sure you have a list of stocks you like but just weren’t ready to buy at the prices of the past several years.
If you don’t have a list, you should! And we can help with that.
You can go to our homepage at and create your own watchlist to track how companies look within our Stock Power Ratings system. Just look for this section in the middle of the homepage and click to add your first ticker.
Now is the time to at least start nibbling.
We don’t know if the bottom is in or if there’s still some further downside.
But if you see a stock you’ve always wanted trading at a price you never expected to see … what are you waiting for? Start a small position, and you can look to add more over the coming weeks and months.
As a case in point, consider conservative retail REIT National Retail Properties (NYSE: NNN), which I wrote about last week.
After this year’s sell-off, NNN trades at prices first seen in 2014 and yields a sweet 5.5%.
Bonus Investing Tip: Save, Save, Save
You can’t invest unless you have the cash to do so. It makes sense to make saving a major priority over the next several months.
The easiest way to save is by upping your 401(k) contribution. If you aren’t already maxing out your 401(k), log in to your account and increase your contribution amount to the absolute highest amount you can afford.
If you’re not quite ready to invest, keep those contributions in the plan’s money market or stable value options. But get in now!
Yes, it’s painful to see smaller paychecks as a result. But you’ll get a tax break for it. You’re also stockpiling the cash you need to buy when the time is right.
Try to save in your old-fashioned taxable account too if possible. Unlike a 401(k) plan, you aren’t limited to a menu of mutual funds. You’ll have dry powder to go after that list of stocks you’ve been eyeing.
And if you need more guidance about stocks to buy, Adam O’Dell and I have you covered with Green Zone Fortunes.
Our model portfolio is focused on mega trends with staying power. These are ideas and innovations that will drive the market forward for years to come.
If you’d like an example, check out Adam’s “Infinite Energy” presentation. He’s targeting the renewable energy mega trend with a variety of recommendations, and his No. 1 stock targets the world’s largest source of untapped energy.
Click here to find out more about it and see how you can join us in Green Zone Fortunes today!
Until next time…
To safe profits,
Charles Sizemore, Co-Editor, Green Zone Fortunes
Charles Sizemore is the co-editor of Green Zone Fortunes and specializes in income and retirement topics. He is also a frequent guest on CNBC, Bloomberg and Fox Business.