Worried about your 401(k)? 'Don't even open that statement if you don't want,' expert says — here's why


The stock market had a blockbuster year in 2021, but the start to the new year has been pretty rocky, and that choppiness could continue due to factors including inflationary pressures and unpredictable world events.

Most experts agree that, if you're investing for a long-term goal like retirement, there's plenty of time for the market to rebound. But knowing that can be cold comfort as you're watching your 401(k)s bounce up and down from one day to the next.

You have a few options here, says Chad Parks, founder and CEO of Ubiquity Retirement + Savings. "Don't worry about the short-term craziness," he says. "This does require some long-term perspective. And I encourage people, don't even open that statement if you don't want to." 

Here, two experts share their tips for monitoring your 401(k) and for staying calm during the process. 

'Accept' that the numbers will move around

The news doesn't need to lead you to panic and check your account too often, says Sean Stein Smith, CPA, member of the American Institute of CPAs' Financial Literacy Commission. "Don't freak out about headlines," he says. As tempting as it is to check your balances after a large market move, Stein Smith says, it's best to resist the urge.

While it's human nature to get emotional about your balance, Park says, approach your results as rationally as possible.

"If you feel good and you're content, take that and enjoy it, but don't let it make you feel bad when it moves down," he says. "Because unless you need that money very, very soon and you had already more or less spent it in your mind or spent it literally … it's going to move around. Just accept that." 

Don't worry about the short-term craziness. This does require some long-term perspective.
Chad Parks
founder and CEO of Ubiquity Retirement + Savings

Play the long game  

"If you know you are investing appropriate for your age, are investing appropriate for your risk tolerance, then this is just part of the process," says Parks. If you're an aggressive investor who took more risk than you should have, though, then that may be an exception: "If you don't like roller coasters, this isn't for you."

Stein Smith compares watching your investments grow to drafting a great new player onto a sports team. "The actual maturation of those players in that team takes time," he says. "And there are going to be good years and bad years, but ultimately … the good players that have been drafted do play out and improve going forward."

For this reason, Stein Smith says, it's impossible to time the market, so don't bother trying. "There are whole parts of the accounting and finance space who are built to actually try to perfectly time the market," he says. "And even those firms don't usually get it right."

Take comfort from history 

Past performance is no guarantee of future results, but Parks says you gain perspective by looking at recent history, such as the events of 2008-2009. "What happened was very similar: the global financial meltdown, real estate bubble burst, stock market drops," he says, noting that this is very much like what's happening today. "But then that sort of set the foundation for a 10 year bull run, and everybody's really benefited from that."

To gain perspective, Parks suggests looking up your 401(k) online, entering a date range, and comparing your balance to where it was five or 10 years ago. "Look at your balance and say, 'OK, you know what, because of my contributions and because of my investments, my account has actually gone up.'" 

Parks likens this to what he calls "grandparents syndrome": "When you have kids, they grow up before your eyes, and you don't really appreciate how much they've changed," he says, but grandparents see the kids less often, so they really notice the growth. "You're watching it every day. ... But if you take a look at it every once in a while where you can go back and look at where it was, you can really appreciate it how much it's grown, and that gives you a little bit more peace of mind."

The ups and downs come with the territory, Stein Smith says. "There are always bull markets, bear markets, run-ups, crashes in different areas of the marketplace, and overall," he says. Going back 80 years, the equity market averages a return between 8% and 10% annually, but along the way there are up years and there are down years, he says. 

For example, while the U.S. experienced a recession from December 2007 through June 2009, and the bear market lasted from October 2007 through March 2009, stocks then entered into a bull market. Stein Smith says that after the worst of economic situations, the market and the economy tend to come back: "Business rolls forward, people have ideas, products get built, services improve."

Trust your original plan

If you had a strategy you were happy with before the recent market bumps, you don't need to feel insecure about it now, Stein Smith says: "That plan still works for you even though the market has increased its price volatility. That should not make you lose faith in your underlying plan." 

Educating yourself on the market is extra important during periods of uncertainty, Stein Smith says. For example, you can check out the investor education resources from the AICPA's 360 Degrees of Financial Literacy program, which includes articles, calculators, and the definitions of key investment terms.

Parks, too, suggests you trust your original strategy: "If you have the comfort of knowing that you had a strategy going into it, that strategy is probably still going to be pretty sound."

Investing involves risk, including the loss of principal. This material has been distributed for informational purposes only and may not apply to all investors or investor portfolios. Investments cannot be made in an index. Unmanaged index returns do not reflect any fees, expenses, or sales charges. Carefully consider your investment objective, risk tolerance, and time horizon prior to effecting material changes to your portfolio or asset allocation. 

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