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With the stock of tech giants — as well as retail giant Amazon — sliding over the past week or so, perhaps you’re fearing for your retirement portfolio.
After all, corporations like Facebook, Apple and Amazon are among the largest in the world. You’ll find their stock in many mutual funds. So, even if you don’t own individual shares of stock in Facebook, for example, there’s a good chance you own mutual funds with shares of Facebook.
Some headlines have pounced on that fact. Two I spotted Thursday:
- USA Today: “How vulnerable are 401(k)s to tech stock selloff that has hit Facebook, Amazon shares?”
- NPR: “Tech Stocks Have Lost Some of Their Luster, Dragging the Stock Market Lower”
So, should you worry about sliding tech stocks taking your retirement accounts down with them? That’s an easy answer: No. Panicking does more harm than good — often leading to bad financial decisions.
But should you be concerned? In short, probably not. If you have invested wisely, you have little if anything to worry about.
Much of my own retirement portfolio is invested in mutual funds that own a boatload of Facebook, Apple and Amazon stock. Yet I’m not worried whatsoever. Here are the biggest reasons why:
I’m in it for the long haul
I’m 99.999 percent sure Facebook, Apple and Amazon will rebound from their latest slides, probably before April is out — if they aren’t already on the path to recovery. These are behemoth, financially stable blue-chip American corporations. Such companies seldom fall apart, especially not overnight.
Further, the tech and retail giants have all recovered from far bigger falls than they’ve seen this month. In fact, compare their current values to what they were worth in the pit of the Great Recession, for example, and you’ll see a bigger picture: Their latest slides are just one of many blips, none of which has yet to harm their long-term stock performance.
Take Facebook, for example. When the market closed on Thursday, it was worth $159.79 per share. That’s down by about 13.7 percent from closing time on March 16 — the day before the New York Times broke the news about Cambridge Analytica — when Facebook was worth $185.09.
But $159.79 is an increase of about 525 percent compared with Facebook’s value just five years ago, at the end of March 2013 — $25.58.
In short, a big part of why I’m not worried is because I don’t plan to touch my retirement funds for years. So, unless you are retiring tomorrow or you’re over-invested in stocks, you also should have little to worry about.
As Money Talks News founder Stacy Johnson often puts it, the No. 1 rule of investing in the stock market is to invest only long-term money. That means money you will not need for at least five or 10 years.
My portfolio is diversified
By choosing mutual funds over stock in individual companies, you shield yourself from much of the blow that would result from one company’s value taking a nosedive.
A mutual fund is an excellent way to diversify your portfolio. Even a stock-only mutual fund will help ensure your money is invested in a variety of companies. That means each company comprises only a fraction of your portfolio. So, even if a company folds, your entire portfolio won’t go down with it.
For example, take the Vanguard 500 Index Fund, a mutual fund touted by billionaire investor Warren Buffett and held by experts like Stacy and probably several other people at Money Talks News, myself included. It currently has 507 holdings.