The recent strikes involving the U.S., Israel and Iran have pushed oil prices higher and knocked stock indexes lower. The Dow sits about 9% below its February peak — a meaningful drop but not the 20% fall that defines a bear market. Still, the pullback has trimmed balances in many Americans’ investment accounts, from college savings to retirement plans.
Your best action depends largely on when you’ll need the money.
If you’re 10 or more years from withdrawals: mostly do nothing
For investors with a decade or longer until they need cash, advisers generally recommend staying the course. Markets typically recover after geopolitical shocks — sometimes within months, often within a few years — so selling in panic can lock in losses and harm long-term returns. Those with a long horizon can view downturns as buying opportunities to accumulate shares at lower prices, though acting when markets feel frightening is understandably difficult, says Steven Elwell, chief investment officer at Level Financial Advisors.
If you’re a few years from retirement or other withdrawals: shift toward safety
If your spending date is approaching, it makes sense to reduce portfolio risk so you won’t be forced to sell after the next market jolt. That usually means gradually moving from stocks into more stable assets such as U.S. Treasury bonds and high-quality fixed income, and maintaining diversification across asset classes. Many target-date retirement funds and 529 college plans do this automatically as the target year nears. Adding international stocks or bonds can also spread risk and capture growth outside the U.S., though those markets have their own sensitivities to global events. For long-term investors who can tolerate some volatility, buying a slice of the global market during a dip can be advantageous, notes Michael Budzinski of Morningstar.
If you need money now: be methodical and unemotional
When you must withdraw during a down market, take steps that reduce the damage. Prefer selling holdings that have held up better rather than the worst performers, since selling losers locks in larger losses and forfeits any rebound. Withdraw only what you truly need so the remainder of your portfolio can recover. Avoid joining a panicked wave of sellers; consider cutting discretionary spending or delaying retirement if feasible. Kevin Khang of Vanguard cautions against hasty moves, and Christopher Holtby of Wealth Advisors Trust Company urges a rational, step-by-step approach.
Bottom line
Match your response to your time horizon. If your horizon is long, staying invested or gradually adding to positions usually offers the best chance of recovery. If you are nearing the time you need funds, rebalance toward safer assets and diversify. If you must take money now, be selective about what you sell and try to preserve as much invested principal as possible so your portfolio can rebound when markets do.
