Hello and welcome to "Dealing with Market Volatility" presentation. My name is Amber Walker, and I'm a senior Employee Education Advisor with PNC. Let's jump right in and first talk about what is market volatility. Market volatility is frequent or significant increases or decreases in values of investments. During this presentation, I will explain why market volatility happens, how it affects retirement accounts, and actions you should or shouldn't consider when it does occur.

Let's first start off with what causes market volatility? While this slide lists several potential catalysts, the bottom line is that any piece of information perceived to be big news, whether related to the economy, new regulations, global politics, and others listed here as examples, has the potential to move the market.

That is investors learn the news and then decide to buy or sell more of a certain type of investments. When more investors are buying a security than selling it, the price will go up. When more are selling than buying, the price, of course, would then go down.

Now let's talk about the effect it could have on your retirement account. When you hear things like the S&P 500 dropped 200 points today or the market is up 3% today, what does that actually mean for the investments in your retirement account? First, it's important to remember that while the value of your account that you see are online or on your statement will go up and down unless you sell an investment, you have not locked in any gains or losses. Your gain or loss exists only on paper.

If the value of an investment has dropped, it is possible that over time it will recover and you will not have actually lost any money on that investment. On the other hand, if you see that the value of your investment has dropped and you sell that investment, then you are at that point locking in that loss.

The second thing to remember is the phrase that the market is a generic term. That can mean a number of different things. Often when you hear that the market gained or lost certain percent, the news is referring to what the S&P 500 did that day. Think of the S&P 500 as a basket of stocks of the 500 largest public companies in the United States unless your account happens to be invested only in those same exact 500 stocks, then the performance of your account will differ from what you hear the market did that day.

Let's talk about strategies that can help manage your retirement investments through periods of market volatility. The first strategy is diversifying your portfolio. You may have heard the saying, 'don't put all of your eggs in one basket'. That advice has been particularly helpful and is true for investors. What this chart shows you is how different kinds of investments performed over a 15 year period.

Each color represents a specific type of investment. For example, in 2009 at the top of the bar chart, you will see a purple square representing the stocks of companies and emerging markets outside of the United States. Stocks in this category were the best performers that year. However, if you go ahead and look at

2011, you'll see the purple boxes now at the bottom of the bar because they were the worst performers that year. No one can predict with certainty which type of investments will do best or worse in a given year.

That's why we recommend that investors build a portfolio with many different asset classes so that when market volatility has a negative impact on one, you increase your chances that the another asset class may offset that loss with a positive performance.

Some investors choose to diversify by building a portfolio of mutual funds with different strategies. For example, one fund might focus on large companies in the United States, another might focus on international opportunities, another might focus on bonds and set of stocks.

Other investors achieve diversification by selecting a single investment vehicle that takes care of diversifying for them. For example, investments known as target date funds are portfolios built to simplify the process for investors by taking care of diversification for you based on a targeted retirement date.

The next strategy we'll talk about is really what not to do. That's trying to time the market. Sometimes after significant decline in investment value, a well intentioned investor will think, 'this is scary, I will sell all of my investments for now, put the money in something less risky like a money market fund.

And then when the market looks like it's on its way back up, I'll go ahead and reinvest them'. The problem with this strategy is that even professional investment managers cannot predict with certainty when the market is going to take a turn. The chart on the slide shows what can happen to an investor because they pull their assets out of the stock market for even a few days, misses out on significant gains because of that bad timing. Over a 20 year period, ending in December of 2024, investors whose kept 100% of their assets in the S&P 500, even during its ups and downs, earned an average annual rate of return of 8.9%. Investors who just missed the best ten days during that entire 20 year period cut their returns almost in half. If you continued and look down, those who missed the 30 or 40 best days turned what could have been a positive return into either no return at all or even a negative. Again, no investor knows for certain when best days is coming, so don't make the mistake of trying to buy or sell just at the right time because bad timing has proven to be costly.

Here's some good news for you. Even if you've never heard of the term dollar cost averaging before, there's a very good chance that you maybe taking advantage of it as a participant in your retirement plan. Dollar cost averaging is an investment technique where the investor puts the same amount of money into their account at regular intervals, for example, once a week or once a month. Regardless of whether the market is up or down, let's take a look at an example of how this benefits you as an investor. This chart shows what it could look like if someone was putting $100 a month into an investment that as of January has a price of $25 a share; that would buy them four shares in the month of January.

While the amount the investor is contributing remains consistent at $100 a month, the share price of the investment fluctuates. In this example, you see the share price drops to as low as $15 in July and August, and it does rise higher to $27 in December. When share prices are lower, the investor automatically buys more shares. When they're higher, the investor automatically buys less shares. For the year, the total amount invested was $1,200, representing 61.9 shares.

Thanks to dollar cost averaging, the average price per share was $19.38. Had the investor put all of the $1,200 in the account in January, their price per share would append $25 and they would have only owned 48 shares. Because your retirement plan takes money out of each of your paychecks, you're likely already leveraging this technique. If you have investment accounts outside of your retirement plan, considering putting the same technique to work for you. If you're in your twenties, you likely won't access your assets in your retirement account for many, many years. That means that even if there is significant decline in your account value due to market volatility, you've got decades to make up any losses. Historically, the longer you are able to hold on investments, the less likely your total return will be negative. On the other hand, if your retirement is imminent, you may soon be withdrawing some portion of the assets to cover your living expenses. For that reason,

It maybe appropriate for you to have a greater portion of your account invested in low risk investments, which are less susceptible to market volatility. These can include short term bonds and even cash-like investments like money market funds. That way, if the stock or bond market fluctuates, the money you need to used in the near term will likely not be affected. There are multiple places where you can find simple calculators online to help you determine how to allocate your account among these different type of investments based on your risk tolerance and how long you plan to work before retiring.

If you check your account balance online, there's a good chance that the same site has what's called an asset allocation calculator. Go ahead and check it out for yourself to see what your asset allocation should be. It's natural to read a headline or listen to the news and feel like a negative story you've heard means you need to hurry up and make a change in your account. Today, I hope you've taken away two key messages. First, while the market volatility may sometimes make you feel like you're on a roller coaster, it's a normal in the world of investing. And second, there are proven strategies you can use to help mitigate an effect of market volatility on your retirement assets. Leveraging these strategies can help you avoid making common mistakes based on emotion. Thank you for listening today, and I hope you have a great day.