NASHVILLE, Tenn. (WTVF) — Markets have plunged into bear market territory, but what does that mean for your portfolio?
When the major stock indices — the S&P 500, Dow Jones and Nasdaq — are down at least 20% from their peak within the last year it's considered a bear market.
According to financial experts — like Andrew Winnett of Legacy Builders Wealth Management in Brentwood, how much the volatility hurts depends on how close someone is to retirement.
"That's unfortunately a dangerous place to be if you need that money to live on and your money is in the market, exposed to risk and down 20%," Winnett said.
Winnett said anyone between six years away from retirement and six years after retirement needs to play it safe. This includes not panic selling.
"People make bad decisions when they're afraid," Winnett said.
Unfortunately, a prolonged drop in the stock market could mean some Baby Boomers will have to change their retirement plans.
"They may have to wait until the market comes back, and that is a bummer. Most people don't want to wait. It's like looking forward to a vacation and planning for it this whole time and then you have to defer for years," he said.
Because it can take years to bounce back from a bear market totally, older Americans may want to move their money around. Consulting with a financial planner could help you protect your assets from losing any more value.
"There are certain companies out there that are trying to earn people's business. They're paying a 20% bonus to move your money to safety where you can participate in market upside but none of the downside," he said.
If you're young, Winnett's advice is to let this play out.
"If you're younger, it doesn't matter. You're in for the long run. You've got time to recover and recuperate because you're still working [and] you don't need access to the funds," he said.
For young people, this bear market could also be an opportunity to scoop up cheap stocks that could be worth something in the next year or two.
On average, bear markets have taken 13 months to go from the peak to the bottom and 27 months to get back to breakeven since World War II.
The biggest decline ever recorded occurred in the bear market after the housing bubble burst in 2008.
The S&P 500 fell 57%.
