Stay Calm and Consider an Old Investing Strategy

Most of what I know about investing comes down to platitudes.

The thing about those old saws — Buy low, sell high … Time in the market beats timing the market — is that they’re generally sensible advice.

Like “buy the dip,” which can be a useful mantra for people who don’t want to delve too deeply into investing theory and strategy. If you’re investing for retirement in a 401(k) or other workplace plan, you’re already buying the dip — whether you know it or not. Throughout the year, the market goes up and down. Your plan is set to invest automatically and regularly, so that means some of your purchases will occur when the market is down.

Obviously, you want to buy investments when prices are low. And you don’t want to flee to cash, because selling means locking in losses. Worse, it means missing out on the market’s best days. Though it may not feel like it when we’re in the middle of a downturn, looking back shows that the market's best days tend to happen shortly after the market's worst days.

That’s another investing saw: Stay the course. Here’s what Fidelity says about the impact of “best days” on your investments.

Let’s say you had $10,000 invested in an S&P 500 index fund starting Jan. 1, 1980, through March 31, 2013. If you left the money in that entire time, you’d have more than $1 million. (Fidelity estimates $1.09 million.)

But if you took it out, missing out on some of those best days, here’s what you’d have instead of that cool million:

• Missed the 5 best days: $676,395
• Missed the 10 best days: $487,185
• Missed the 30 best days: $176,591
• Missed the 50 best days: $77,920

According to Fidelity, buying the dip always works — even after the falls of 2008 and 2020, which, at the time, felt like catastrophes.

For more on buying the dip, read our reporter Brenden Rearick’s story.

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That’s the estimated amount of retirement savings married couples forgo each year by not taking advantage of the better employer match when they have two workplace plans.

TL;DR: If it’s not possible for both partners to save up to the match in their respective plans, focus on the 401(k) with the better match.

• If you’re over 50 and have nothing in retirement savings, consider taking some of these steps now.
• Test yourself on retirement savings plans rules — some welcome changes are coming, courtesy of the SECURE Act.
• These four steps are critical to planning your retirement life — and one has nothing to do with your finances.

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