Managing Retirement Savings in Volatile Markets

2. Stay diversified
Markets are virtually impossible to time and they don't all move together. Being invested across markets allows you to participate in market upswings -- as well as market downturns.

Financial securities are commonly broken down into stocks, bonds and cash, with cash being shorthand for investments in money market instruments -- not currency. Stocks, bonds and cash represent separate asset classes, and within the stock and bond categories there are even more asset classes.

In the late '90s, investors flocked to the stock market because of the high returns it generated. The music stopped and the stock market was no longer the place to be. In the new century, real estate came to the fore and investors focused on buying properties. Again, the music stopped, and the real estate market was no longer the place to be.

Rather than play musical chairs with your investments, invest across asset classes by diversifying your investments and periodically rebalance your holdings to bring them back to a target asset allocation.

3. Rebalance your portfolio
"No tree grows to the sun." Rebalancing your portfolio involves pruning your winning positions and using that money to buy into underperforming assets at regular intervals to bring you back to your target asset allocation.

Calendar rebalancing takes place on a periodic basis, whether quarterly or annually. Percentage-of-portfolio rebalancing takes place when an asset group is over or under the target asset allocation by a stated percentage amount. For example, if you're targeting stocks to be 50 percent of your portfolio and they currently represent 35 percent of your portfolio, you would need to reallocate your portfolio, bringing stocks back to 50 percent of your portfolio valuation.

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