Financial advisors say your investment strategy should change as you age. Now is a good time to reassess your situation and risk tolerance.
MINNEAPOLIS — President Trump’s tariff announcement Wednesday has sent shockwaves throughout the stock market. Several key indexes were down on Thursday as companies reacted to the news of higher tariffs.
This volatility in the stock market has many investors worried, especially retirement savers who are either recently retired or close to retirement.
“We have been taking a lot of calls and making sure everyone is comfortable,” Prosperwell Financial Senior Wealth Advisor Justin Gandrud said.
A lot of the clients who are calling in are asking the same basic questions.
“How do we prepare for this? How does this affect me? How do I know I’m going to be okay?” Gandrud said the answers to a lot of these questions depend on two things: your age and how much risk you’re willing to take.
He said now is a good time to look at your retirement account to see if your investments match your own unique situation.
“We want to make sure that money is there for you just as you do too,” Gandrud said.
Financial advisors say the best way to protect retirement savings from outside factors is through diversification.
Gandrud said it’s important to spread out your money during times of uncertainty, especially now when no one knows how specific companies and industries will be affected by the new tariffs.
Many financial advisors agree retirement investors shouldn’t have more than 10% of their retirement savings invested in a single company.
“It’s also important to not make emotional decisions right now,” Gandrud said.
Investors should also consider their age and risk tolerance when it comes to their investments.
In the financial world there is a common theory called the “100 Minus Your Age Rule.” The basic idea of the rule is that investors should start with 100 and subtract their age to determine how much of their retirement portfolio should be invested in the stock market.
For example, if an investor is 30 years old, they should invest 70% of their retirement savings in the stock market and 30% into bonds.
However, at age 70 those numbers should flip, with the rule suggesting investors should have 30% invested in the stock market and 70% in bonds.
This rule is merely a suggestion, and not every financial advisor agrees with it. Gandrud said every investor is unique, so a one-size-fits-all rule can’t apply to everyone.
“It’s somewhat of a balancing act,” Gandrud said. “You want your money to be protected, but you also want to be open to the potential of higher returns.”
Investors who are worried about volatility in the coming months are encouraged to pursue safer options such as bonds, CDs and high-interest bank accounts.
Gandrud is also recommending indexes, funds and ETF’s for investors who want to invest in the stock market while also spreading out their money to reduce their risk.
