ADP Retirement Services Information Portal

Sitting Out the Market? Wading in May Be Better Than Diving In.


Jim, 57, sold his stock funds in March 2009, after the S&P 500 Index lost more than a third of its value.1 Since then, a four-year bull market has roared back, with U.S. stocks tripling in value. Sidelined in a money market account, Jim’s savings have stagnated. With fewer than 10 years to go until retirement, he’s itching to get back into stocks.

Tiptoeing back into the markets may be a more sensible approach for Jim than letting his emotions guide his impulse to dive back in. He needs to create a plan that matches his objectives and time horizon, taking into account that there always will be periods of market volatility and recognizing that his investment strategy likely will need to change over time. Strategies for Jim to consider might include:

  • Dollar-cost average. Rather than getting back into stocks all at once, Jim could set aside a fixed amount each month and invest over a 12- to 18-month period.2
  • Invest in a set-it-and-forget-it fund. Jim could pick a single target date fund3 with a target retirement date that most closely matches the date when he expects to retire. The fund is designed to become more conservative as Jim approaches retirement.
  • Dial back risk. Five years before his expected retirement date, Jim might consider reducing his total stock exposure to perhaps not more than 30% or 40% of his portfolio, depending on his expected retirement time horizon and risk tolerance.

You should be aware that a financial advisor charges a fee or commission for his or her services, and that target date funds and managed accounts also have fees and charges associated with them. If you prefer to manage your account yourself, there are a host of online calculators and worksheets from your plan provider, AARP, and many other sources.


1. The S&P 500 is an unmanaged index and, therefore, has no expenses. Investors cannot invest directly in an index.
2. Dollar-cost averaging does not protect against loss or guarantee a profit. Investors should carefully consider their ability to maintain a dollar-cost averaging program in a declining market.
3. The principal value of a target date fund is not guaranteed at any time, including at the target date.

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