Markets have been a little “choppy” as they say of late, and I wonder (notice I didn’t say “worry”) if this is the “correction” or “pullback” that many have predicted given that we have had such a good run. If it is (or turns to have been – because we cannot know in advance) let me assure you that it is normal, it is a matter of “when” not “if”, and is not something to lose sleep over.
Instead of worrying about what the market is going to do or not do, consider instead that last year, research by Putnam Investments suggested that households putting less than 10% of their salaries or income toward retirement are at risk for not meeting their retirement income needs. People saving 0% might replace only 54% of their income (assuming they are eligible for Social Security.) Saving 3% of your income might get you up to a 56% replacement ratio and those saving over 3% and up to 10% might meet up to 84% of their needs. Obviously, you’re better off saving 10% or more.
Since you can’t control or predict what the market is going to do, (“Economic forecasting exists to make astrology look respectable”… J.K. Galbraith), the best “investment decision” you could make might be to instead evaluate whether or not you are saving enough money in the first place. Use your energies in the more worthwhile endeavor of determining how to “allocate” more of your income toward your retirement goal.
When we do have that “correction,” the extra money you’re investing will be invested at a lower cost (remember, we like to buy things “on sale”) and the reduction to the value of your current holdings will most probably (nothing in life is absolutely certain) be “temporary” as suggested by the entire weight of historical evidence. I think Warren Buffet is credited with saying something like “investing is simple, but not easy.” Sometimes it is obvious what is necessary to do, but are we willing to actually do it?