#2 Avoid the temptation to check your 401(k). 

The main thrust of the argument against checking your 401(k) and other retirement investment vehicles during choppy markets is so that you don’t end up selling your stocks at fire-sale prices in a panic. 

Studies from two behavioral economists Shlomo Benartzi and Richard Thaler, highlighted by a WSJ story, show that the more people look at their 401(k)s, the lower their long-term returns are likely to be. In fact, those who resisted the temptation to monitor the market earned significantly higher profits over time than those who checked annually because they were more likely to continue investing. 

The same story cites Bank of America data going back to 1929 in that: “The volatility of stocks also helps explain why peeking can be painful. Since 1929, the S&P 500 index has posted declines on 46% of days in which the markets are open, subjecting those who check their balances daily to lots of bad news. In contrast, those who looked at where they stood once a year saw losses only 25% of the time. Over 10-year periods, the odds of a loss were just 6%.”

Most investors would be better off dollar-cost averaging during market declines, meaning that they would buy a greater number of shares during market declines with the same amount of money compared to fewer shares during market rebounds.

#3  Adjust your portfolio if need be.

It’s simple—stocks cannot and will not go up every day. In times of crisis, it’s important to recall that stocks rarely go up in a straight line. You have to keep investing in regular increments to give yourself the best chance come retirement. However, dollar-cost averaging might not work for those who have a shorter time horizon. 

Choppy markets present a good opportunity to section out your portfolio into emergencies, protection, and growth potential if you haven’t already done so recently. This way you can better manage the risk if you need to pay your child’s college tuition in the fall, for example. 

The starting point for this is asking yourself what your investment profile is, and then determining the risk tolerance and time horizon for each basket to help you make better decisions in the market.