Retirement plan investors need to
realize that equity markets go up and down, Barron says. Often,
participants in defined contribution (DC) plans see investments go up
and think that is the time to buy them, but when stocks go down, that is
the time to buy. For DC plans, participants read, see and hear that
stocks are plummeting and that creates great fear and concern. “It’s
about communicating,” Barron says.
Multi-asset portfolios, such
as target-date funds, are designed to help employees manage through
complexity and change in the markets. For those participants who manage
their own portfolios, sponsors should communicate that they need to
manage their portfolios with their risk tolerance, goals and savings
targets in mind.
“We are reaching out to our clients and pointing
out that over the long term, the world survives. These short-term
events don’t last, so don’t speculate on outcomes that are completely
unknown,” Barron says.
For defined benefit (DB) plans, he
suggests that if it’s been a while since plan sponsors looked at funded
status and strategic asset allocation, now is time to do so. “Set it and
forget it is not a best practice. They need to ask if there strategy
still makes sense for them.”
Barron adds, “We frankly think this
is not the end of the world, but when sponsors get a peek at something
that could have a dramatic effect, that is a time to pull a committee
together and review investing strategies.
work all the time, but works a lot of the time, according to Barron. He
suggests plan sponsors look at their investments and see how much
diversification they have. Look at hard assets and assets generally
uncorrelated with market swings. NEXT: Additional thoughts