For those in retirement, the roller coaster of the past year proves that the biggest influence on their nest egg is “not what they hear on the news, but rather how they respond to it.” This according to a recent article in Barron’s.

When the markets tumbled in March, the article reports that while many investors “did exactly what they were supposed to do” by staying in the market and even increasing their retirement contributions, a “large share of investors cashed out or remained on the sidelines, fearing that the worst was yet to come.”

The article outlines the following strategies for “avoiding the biggest behavioral mistakes:”

Trying to game the market: The Covid-19 pandemic ushered in retail investors of all ages who have taken to trading on platforms like Robinhood and Webull. But the article notes that conventional wisdom from most experts on trading individual stocks is “simple: Don’t do it.” If you must, it suggests spending only what you’re willing to lose—“and that means money you might have otherwise spent on travel or other entertainment, not retirement.”

Hoarding Cash: “Investors who stayed invested or upped the ante on equities have, in many cases, been rewarded.” Unfortunately, the fact that the current market seems at odds with the underlying economic reality has some investors anxious and has triggered exiting to cash or putting retirement contributions on hold. Instead, investors might consider the following strategies:

• Examining what a sustained downturn would do to their portfolio and how that might affect their retirement timeline or income. “In many cases,” the article notes, “weathering the downturn is better than missing out on long-term gains.”
• Increasing emergency savings to cover up to two years of living expense, so they can avoid having to sell assets in a down market.
• Reduce equity exposure, say from 60% to 50%.
• If an investor feels compelled to go to cash, the article suggests doing so with a concrete plan to dollar-cost-average back into the market in a certain amount of time (i.e., six months to a year).

Reshuffling Your Portfolio: The article argues that this might be the most common mistake investors make. While times of uncertainty can trigger people to want to react by shifting from passive to active strategies or moving between sectors, data shows that over time “the odds are stacked against investors who try to time the top or bottom or rotations in style or sectors.” It adds, “Myriad studies have shown that active traders tend to have subpar results over time, while buy-and-hold investors earn the highest returns over time.”

The article concludes: “You can’t control everything that is going on in the world, but you can control your process for making decisions.” During periods of calm, it suggests that retirees establish a firm investment plan including guidelines that they commit to following during times of tumult.