If you are 30 years old with 80% of your 401-K in equity securities and the market drops by 20%, what should you do?

Maintaining your appropriate ratio of stocks is a prudent approach during a market downturn. When the market drops, many investors might feel compelled to make impulsive decisions out of fear of losing money. However, if you're already invested in an asset allocation that aligns with your long-term financial goals and risk tolerance, selling off stocks in a panic can exacerbate losses and derail your investment strategy.

By maintaining the same ratio of stocks, you allow your portfolio the opportunity to recover when the market rebounds. This strategy aligns with the concept of staying the course in investing, where the principle action during market volatility is often to hold onto your investments rather than making drastic changes.

Moreover, a long investment horizon, like that of a 30-year-old, generally allows for a significant recovery period, making equity allocations potentially beneficial in the long term despite short-term declines. This approach supports a disciplined investment strategy that can help achieve growth over time, emphasizing the importance of sticking to your plan rather than reacting impulsively to market fluctuations.