Recession: Eight 401(K) Rules To Follow

The following are eight rules that you should follow to help you manage your workplace retirement plans while the economy is in a recession.

Some investors may be enticed to buy well-performing assets after recent gains. This can cause investors to "buy high," depressing future returns.

Don't chase recent performance.

Stick to your asset allocation and rebalance often. Mechanical and methodical processes reduce behavioural errors.

Don't try to time the market

Bonds reduce risk and produce income. Rising yields boost returns. Matching bond fund length to time horizon decreases interest rate risk.

Never panic-sell bonds

From 1972 through now, the U.S. stock market returned 10.13 percent annually. Stay the course if your stock allocation is diverse.

Don't panic-sell your stocks

Employer matches are a great method to get a quick return on your investment. Employer matches are a free lunch in investing beyond diversity.

Use employer match contributions

This method is too theoretical. In a recession or bear market, examine your risk tolerance honestly.

Reevaluate risk tolerance and asset allocation

They may be of pricey, complicated, and underperform for years. It will be better to stick to fundamental asset classes to avoid the "shiny object effect."

Don't let fancy investments sway you

This can help you save money during a recession. 401(k) fund names and descriptions might be confusing.

Keep fees low