And if bonds are up at the same time, your actual decline will be less than 10 percent. Stick to your long-range plan. Major portfolio changes should be made primarily when your investment goals or personal financial situation changes significantly, not because of market volatility. Reassess your comfort level. Not all of us are cut out to be aggressive investors.
Portfolios can get out of whack when markets take off in one direction or the other.
For example, an original mix of 50 percent stocks and 50 percent cash and bonds may now be closer in value to 55 or 60 percent stocks. That means your portfolio has unintentionally become riskier. Keep a cash cushion. Many financial planners recommend that retirees keep at least two to three years' worth of living expenses invested in cash and in bonds that mature within two to three years. That way, during a down stock market you aren't forced to draw on the stock portion of your portfolio for living expenses.