During the last few months, as organizations from the secular to the faith-based world have had to trim staff, reduce pay or restructure benefits, many participants have wondered if they should temporarily cease retirement contributions. Declines in market value of their investments have helped accelerate this thinking.
Nothing could be further from the truth.
As you make contributions to your retirement account, you are buying shares of the funds in which you have chosen to invest. While prices are now near decade-long lows, you are able to buy more shares today than you could have when the market was near its peak in late 2007 and early 2008. For example, if an investor is regularly contributing $100 a month to a fund with a $10 share price, he buys 10 shares each month. If the value of that share price drops to $5 per share, that same investor now buys 20 shares each month. As the markets begin to recover he can benefit from twice as many shares growing in value. Case in point, if you’ve been consistently contributing to your retirement account, you are acquiring more mutual fund shares because the per-share value is lower now. The multiplier effect shown in the example above takes route when the markets recover. While we can’t be sure of a recovery date, we can see that markets have recovered throughout history, benefitting those who chose to stay the course with consistent contributions — and using history as a reliable guide, we believe markets eventually will recover and grow again.
If anything, with prices at the lowest they’ve been since the mid-1990s, now may be a great time to consider increasing your contributions, not decreasing them. It’s the same as when your favorite department, hardware, electronics or bookstore reduces its prices. Stores lower prices on products that aren’t selling, and you seize it as a buying opportunity. Many investors think they’ll wait to get back into the market when prices rise again. That’s like seeing a sale at your favorite store, but deciding not to buy until the products have returned to full price.
GuideStone encourages all retirement investors to develop a longer-term focus toward their investments. When things are going well, it’s easy to choose to stay the course, to continue making appropriate contributions and to stay properly diversified. Investment strategies were meant for trying times, when it’s easy to lose sight of the goals.
Our investment strategy should be strategic in focus and discipline. An investor’s perspective should be on the long-term, not on making tactical changes each and every time the market drops or rises. For long-term retirement investors, the best course of action — in good times and bad — is to focus on your long-term goals and to make steady contributions to an age- and risk-appropriate portfolio.
GuideStone makes available helpful calculators and educational materials elsewhere on our website to help you determine if you are on track for retirement.
You should carefully consider the investment objectives, risks, charges and expenses of GuideStone Funds before investing. For a copy of the prospectus with this and other information about the funds, please
download a prospectus (pdf)
or call 1-888-98-GUIDE (1-888-984-8433). You should read the prospectus carefully before investing.