Volatility returned to the markets this week. Depending on your definition, we've had a “correction” or a “pull back”. Whatever you want to call it, there has been a 10% downturn from the highs of this year.

The most recent corrections like this were in 2015, when twice, we saw the market take dips of 12% or more. You'll see that in the illustration below from this weeks NY Times. We've been a little spoiled as investors for the past year as we've watched the market do one thing; go up, with minimal drawbacks. The week serves as a reminder that markets do change and volatility will occur.

Psychologically, declines can be hard for investors who are saving for retirement and for those who are currently drawing from their investments.

Don't get us wrong, we don't like seeing the market go down either. But here are a few thoughts to consider, regardless of what stage of investing you are in.

For those that are still working and contributing to their retirement accounts, the good news is you have an opportunity to continue to add to your account at lower levels. With the same contribution amount, you are able to purchase more shares than you could last week.
For investors that are drawing from their retirement accounts, if your withdrawals are reasonable and your allocated appropriately, this should not have a significant effect on your retirement plan -- long term. Be sure to review your asset allocation; make sure that it is in line with your tolerance for risk and your financial plan.
For those investors that have taken a portfolio "hit" that they would consider excessive, this may serve as encouragement to consult with a financial professional to make sure that you understand the kind of risk you are taking on in your portfolio and have a plan that helps you be able to withstand market volatility.

By: Scott Busch, MBA

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Volatility in the Markets