After Nasty Stock Quarter: Advice for Every Age Group of Investors

No doubt you're in a panic. That's what you do, especially when the stock market just had its worst quarter in four years.

If you had an investment adviser, you'd be calling him or her, asking when you should bail out of the market.

That adviser would talk you off the ledge. Among other things, the adviser would remind you that stocks rise and fall, sometimes by a lot (down 36.8% in 2008 and up 32.3% in 2013) but over the long term they've risen about 10% per year since the Depression.

But what if you didn't have an adviser to stop you from making irrational mistakes? No worries. We've got you covered. Rick Ferri, author of All About Asset Allocation; Moshe Milevsky, author of The Seven Most Important Equations for Your Retirement; and William Bernstein, author of The Intelligent Asset Allocator, offered this advice to stressed-out investors.

1. Retirees

Milevsky: In response to the market volatility, think about reducing your withdrawals from your portfolio to minimize the impact of sequence-of-returns risk, (the risk that you'll withdraw money from your retirement accounts when markets are falling and you might not have enough time for your portfolio to recover from the effects of the withdrawals and the down market) but don't change your asset allocation. It's too late

Ferri: Retirees have lived through many bear markets, some much worse than the current correction. You've seen volatility several times and should have learned by now not to react emotionally to it. This, too, shall pass.

2. Pre-retirees

Milevsky: The recent drop in equity values should be taken as a warning sign of what can go wrong during the critical transition to retirement. Think carefully about the next five to 10 years of work and how to fortify your investment portfolio with guaranteed sources of retirement income.

Ferri: Pre-retirees should focus on their long-term goals to reach retirement with adequate assets. This means having a long-term asset allocation and sticking to it. Trying to time markets by jumping in and out based on fear or greed is not a prudent long-term strategy.

3. Gen X

Milevsky: This is a good opportunity to tilt your asset allocation from bonds to stocks. Nothing dramatic, of course. But your lifetime horizon is probably much longer than you think. Yes, market values might continue to decline, so perhaps rebalance slowly over the next six to 12 months.

Ferri: Same advice for Gen X as for pre-retirees.

4. Gen Y/Millennials

Milevsky: Lucky you. Stocks have just gone on sale. So, if you haven't given much thought to saving money for retirement, now is a great time to get in the game and buy a piece of the future — for less. Start saving today and catch up with your peers. Ask about your 401(k) plan at work and take advantage of the maximum matching (free) money.

Ferri: In the long term, stocks have always delivered the highest return on investment. That means that young investors should have a heavy allocation to stocks. However, if you are hesitant to invest in stocks because you don't have a lot of experience, then you should start with a low allocation and work your way higher over time.

5. For everyone

For his part, Bernstein says it matters less what generation of investor you are and more when you need the money. "There are only two kinds of assets," he says. 

• "Risky ones that you hold for long-term return, and 
• Riskless ones — that is, anything with a government guarantee — for short-term safety."

The recent market decline, he says, is not only a fine reminder of that distinction, but a cheap one as well, since real bear markets can see stock prices fall 40% to 60%, and sometimes more.

"The key question is: When do you need the money?" he said. 

"If you're Gen Y, that's hopefully not for a long time; not only can you tolerate market turbulence, you should invest aggressively and get down on your knees and pray for frequent bouts of it so you can acquire shares cheaply. 

Gen Xers should be a little more cautious. At the opposite end of the spectrum, the average 70-year-old has no margin for error; low returns immediately following retirement combined with withdrawals can drain a stock-heavy nest egg faster than you can say 'financial crisis.' Pre-retirees can be perhaps a little more aggressive." (usatoday)

Moshe Milevsky, author of "The Seven Most Important Equations for Your Retirement." (Photo: Alex Urosevic)

Rick Ferri, author of "All About Asset Allocation." (Photo: Dwight Cendrowski)