With uncertainty, and with it market volatility, on the horizon for 2021, now is a great time for retirement plan participants to consider their risk tolerance and consider their retirement asset allocation.While it is important to never make asset allocation changes based on the minute-by-minute headlines from social media, GuideStone® experts say a regular, strategic review of one’s asset allocation, considering one’s risk tolerance, is an important financial planning goal.
To that end, GuideStone makes available a Retirement Planning and Guidance page (GuideStoneRetirement.org/InvestmentAdvice), which includes GuideStone’s Investment Recommendation tool.
“We never encourage anyone to try to time the market, as it often leads to buying high and selling low,” GuideStone President O.S. Hawkins said. “However, from time to time, it makes sense to make strategic asset allocation changes based on your time horizon, risk tolerance or need to rebalance a portfolio. Just ensure that these changes are driven by a careful consideration of the facts and not the emotions of a good or bad day in the market or the headlines of the moment.”
David Spika, GuideStone chief strategic investment officer, echoed those insights.
“Investor risk tolerance generally declines as we age and move closer to retirement,” Spika said. “In addition, circumstances in our lives, such as a job change or a child moving back home, may also alter our risk tolerance. Additionally, market movements, such as a large gain or decline in the stock market, can create a situation where your allocation is not aligned with your long-term goals. As a result, it’s prudent to evaluate your asset allocation on an annual basis to ensure it is still appropriate for your circumstances.”
Asset allocations are automatically reallocated for those invested in GuideStone’s target date family of funds, the MyDestination Funds®.
Evaluating and increasing retirement plan contributions is an additional strategy that can help participants reach their retirement savings goal.
GuideStone recommends four basic principles for retirement plan investors:
- Always focus on your long-term objectives, not your emotions. Specifically regarding retirement participants, these assets are to serve your needs for a long period of time. Make sure your objectives and actions are consistent with your time horizon.
- Avoid making impulsive decisions. Making changes based on short-term market moves is almost a guarantee for failure, as it promotes buying high and selling low. The performance of your account moving forward will be determined based on results of the financial markets in the future, not the past. Investors cannot sell yesterday’s losses or buy yesterday’s gains.
- Don’t count losses (or gains). Consistent contributions to a retirement plan afford investors a systematic way of taking advantage of investment opportunities as markets ebb and flow.
- Maintain realistic expectations about market behavior. Financial markets in the short term tend to fluctuate in response to social, political and economic events. However, historically, the markets stabilize and return to profitability over the long term, focusing on the underlying fundamentals.
Roy Hayhurst is director of denominational and public relations services at GuideStone.
Director of Denominational and Public Relations Services
GuideStone Financial Resources of the Southern Baptist Convention®
Roy.Hayhurst@GuideStone.org | (214) 720-2141
There can be no guarantee that any strategy will be successful. Diversification does not ensure a profit or protect against a loss. Investing in alternatives presents the opportunity for heightened volatility and may not be suitable for all investors.
In addition to his or her retirement age, an investor should consider other factors, including his or her risk tolerance, personal circumstances and complete financial situation. The Fund is not guaranteed, and it is possible to lose money by investing in the Fund at any point, including after the target date. The use of glide paths that show the Fund’s allocations at different points during the Fund’s time frame are not guaranteed and can change without notification. The intended percentage allocations of a target date fund among types of investments may be modified without a shareholder vote.
The MyDestination Funds (“Funds”) pursue their objectives by investing primarily in a diversified portfolio of GuideStone Funds® Select Funds that represent various asset classes. The Funds are managed to the specific retirement year included in their names and assume a retirement age of 65. The target date in the name of the Funds is the approximate date when an investor plans to start withdrawing money. Over time, the allocation to asset classes will change according to a predetermined “glide path” that adjusts the percentage of fixed income securities and the percentage of equity securities to become more conservative each year until approximately 15 years after the target date. The Funds may be suitable for investors who want a simplified “one fund” retirement solution, are willing to pay slightly higher fees to get a diversified mix of investments that becomes more conservative over time, and plan to retire at an age that is near the year listed in the name of the Funds. By investing in the Funds, you will also incur the expenses and risks of the underlying Select Funds. The principal risks of the Funds will change depending on the asset mix of the Select Funds in which they invest. You may directly invest in the Select Funds. The Funds’ value will go up and down in response to changes in the share prices of the investments that they own. The amount invested in the Funds is not guaranteed to increase, is not guaranteed against loss, nor is the amount of the original investment guaranteed at the target date.
You should carefully consider the investment objectives, risks, charges and expenses of the GuideStone Funds before investing. A prospectus with this and other information about the Funds may be obtained by calling 1-888-GS-FUNDS (1-888-473-8637) or downloading one at GuideStoneFunds.com/Funds. It should be read carefully before investing.