The stock market started the week on a rough note.
Investors are worried that stimulus talks in Washington will fail, adding more pressure to the economy.
Meanwhile, surging coronavirus cases are raising concerns about the need for closings and lockdowns.
And of course, the looming election leaves us with a lot of uncertainty regarding how the country will be run over the next few years.
With all of this uncertainty, we could see more ups and downs in the market over the next few weeks.
So here’s my question to you…
Is your retirement prepared to weather another rough patch?
Today, I want to share a three-step checklist to help you protect your retirement wealth and even thrive during times of uncertainty.
A Market Pullback Is A Season for Caution — But Not for Panic
Today’s investing environment is full of cross currents that can be difficult to navigate.
On the positive side, the Fed is keeping interest rates exceptionally low which helps to prop up the economy.
We’ve also got an amazing tech revolution that’s changing the way people work, drive and live their lives.
There are hundreds of great stocks that offer tremendous growth opportunities for your retirement account.
And while Congress is still facing a stalemate when it comes to stimulus negotiations, there’s no doubt that some extra stimulus will eventually come to help the economy over the next several months.
These are all positive tailwinds for investors, and it’s wise to have long-term positions in your retirement account that will profit from these trends.
But at the same time, some of the short-term headwinds could lead to a temporary pullback in the market. And it’s important to be prepared to weather some volatility over the next several weeks.
It’s wise to keep a perspective of caution in today’s market. But it’s certainly no time to panic.
Here are three suggestions I have to help you protect your wealth and take advantage of any temporary pullback we may see.
Keep Some Cash on Hand
As a general rule, it’s always a good idea to have some extra cash in your retirement account.
When you hold cash, you’re ensuring that a portion of your wealth can’t be hurt by a market pullback.
Of course, too much cash is never a good thing. With such low interest rates, it’s largely unproductive.
But when you have some cash in your account, you can afford to pay your bills and cover day-to-day expenses for a few months without having to sell an investment at the wrong time.
I’d hate to be in a spot where I needed cash and had to sell some stock at a low price just to cover a mortgage payment or pay a grocery bill.
Having cash on hand also allows you to take advantage of a market pullback.
If some of your favorite stocks trade lower in the next few weeks, some cash in your account will give you the luxury of being able to buy shares at cheaper prices.
This is a great way to boost your wealth and take advantage of a turbulent market.
And if you’re currently holding stocks that have profited from the market rebound, it could be a great time to sell part of your position to add cash to your account and reduce the risk that a pullback would pose to your retirement.
Invest in Companies With Stable Businesses
Not all stocks are treated equally when investors start to worry and the market pulls back.
In most cases, the more speculative the stock the bigger the pullback.
And investors often sell shares of high-priced growth stocks and reinvest their capital into more stable companies.
So an overall pullback for the market can sometimes lead to accelerated gains for some of the market’s most stable stocks.
As a reader of Rich Retirement Letter, you know that I’m a big fan of blue-chip companies that pay reliable dividends.
Some of these stocks deserve a spot in your retirement account — regardless of what season the overall market is in.
But during times of uncertainty, dividend stocks should represent an even bigger portion of your investments because of the income and stability they provide.
If you increase your position in these dividend stocks today, you’ll likely take some of the income you receive from them and reinvest the cash in growth opportunities at a cheaper price after a pullback.
Bottom line: income plays give you plenty of options to grow your wealth during times of uncertainty.
Make a List of Stocks to Buy at Cheaper Prices
I can’t tell you how many times I’ve heard someone tell me, “if only I’d bought shares of Apple at X” or, “I should have pulled the trigger on Zoom when it was at Y.”
It’s normal to look at a stock and wish you had bought shares at a much lower price.
But can you have the courage to buy when your favorite stocks are trading lower?
Most investors get worried and don’t follow through buying during a pullback.
One of the best ways to make sure you’re able to benefit from a pullback is to write down a list of ten stocks that you wish you owned.
You can even put a price point for each that you’d love to buy the stock at.
Then if we get a pullback in the market, keep a close eye on your list.
If your favorite stock pulls back to the level you wrote down, consider buying!
You may want to buy a bit at a time, let’s say over a few weeks. That way if the stock drops farther than you expect, you’ll be able to buy some shares even cheaper.
By writing down a list of stocks you want to own and the price that you’re willing to pay, you’re taking emotion out of your decision-making process and managing your retirement investments like a professional.
So do it today!