A 53-year-old investor named Amanda recently reached out to Suze Orman on the "Women & Money" podcast with a pressing question about her $250,000 Roth IRA. Amanda's account has been losing value daily, and she's feeling anxious about whether to move her money to cash or stay invested in the market.
Assess Whether You’re Losing Principal or Profit
Orman emphasized the importance of distinguishing between losing principal versus losing profit. If Amanda's account balance is down from recent highs but still above her original investment, Orman suggests holding on if the money is invested in quality stocks. However, if Amanda's current balance has dropped below her initial $250,000 investment, it may be time to reconsider her strategy.
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"If it’s your principal that you are now losing, I would probably come out," Orman said. "Because either way you're going to lose sleep at night and you could take this money and you could put them into treasuries or CDs and have it earn a nice 4, 4.5% interest for you right around there and you could sleep at night."
This advice aligns with Orman's broader guidance that stock market investments should be for money you won't need for at least five years. She stated that money should only be put in the stock market if you won't need it for five years because it typically takes that long for the market to bounce back.
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Consider Moving to Safer Investments
If Amanda decides that the stress of market fluctuations is too much, Orman suggests shifting the funds into more stable, income-generating options like U.S. Treasuries or certificates of deposit. Current rates on these products are around 4% to 4.5%, which could provide Amanda with a steady return while protecting her principal.
Orman pointed out that Amanda's portfolio manager at Edward Jones claims the money is invested in good Fortune 500 companies. If Amanda is still above her original investment and believes in the strength of those companies, staying invested could allow her to recover from the current downturn over time.
However, if the account is dipping below her original balance and causing Amanda to lose sleep, Orman said moving to cash or fixed-income options could offer peace of mind.
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Don't Let Fear Drive Financial Decisions
Orman is known for advising investors to avoid making emotional decisions during market downturns. However, in Amanda's case, the situation seems more nuanced. Orman acknowledged that watching an account balance drop day after day can be unsettling—especially when it involves retirement savings.
"I know I say don't let fear make rash decisions for you," Orman said. "But this seems to me that this isn't a rash decision. This is where you have been watching this go down over and over and over."
If Amanda's losses are cutting into her principal and causing sleepless nights, Orman believes it's reasonable to shift to safer assets.
Focus on Financial Peace of Mind
Ultimately, Orman advised Amanda to prioritize her comfort level and financial stability. If Amanda chooses to stay invested, she should have confidence in the long-term strength of her portfolio. If the stress of market losses is too much, reallocating to stable investments could help Amanda protect her principal while earning a modest return.
Orman's message was clear: financial decisions should align with personal comfort and long-term goals, not short-term market swings.
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