If you’ve checked your retirement portfolio lately; you’ve likely noticed some unsettling red numbers in your technology holdings. Software stocks are experiencing significant selling pressure, with the S&P North American Technology Software Index down roughly 18% this year. For many retirees and near-retirees who hold tech-heavy index funds, this volatility can feel unnerving. But before you reach for the sell button, let’s talk about why staying the course is likely your best move.
Understanding What’s Happening
The current tech selloff isn’t random market chaos, it’s driven by a specific concern. Investors worry that artificial intelligence (AI) tools could disrupt traditional software companies’ business models. The fear is that companies might use AI to build their own software solutions rather than purchasing from established providers. This represents a fundamental shift in how software might be consumed, and markets are pricing in that uncertainty.
However, it’s worth remembering that technology disruption is nothing new. We’ve seen similar concerns during the shift from desktop to cloud computing, from on-premise to software-as-a-service, and numerous other transitions. The companies that adapted survived and thrived. Markets often overreact to uncertainty before the reality becomes clear.
Why Market Timing Rarely Works
For retirees, the instinct to sell during market downturns is understandable but historically costly. Study after study shows that individual investors who try to time the market typically underperform those who stay invested. The problem is simple: you have to be right twice, once when you sell and again when you buy back in. Missing just a few of the market’s best days can significantly impact your long-term returns, and those best days often come immediately after the worst ones.
Additionally, if you’re holding these stocks in a taxable account, selling now locks in losses for tax purposes but also means you’ll miss any recovery. In tax-advantaged retirement accounts, selling means you’re converting a temporary paper loss into a permanent realized one.
What You Should Do Instead
First, review your overall asset allocation. If you’re within five years of retirement or already retired, conventional wisdom suggests you should have 40-60% in bonds, alternatives, and cash equivalents. If a 20% tech stock decline is causing you significant stress, it may signal that your portfolio is too aggressive for your risk tolerance or time horizon.
Second, consider this an opportunity to rebalance. If tech stocks now represent a smaller percentage of your portfolio than your target allocation, this could be a good time to buy more, not sell. This is the essence of “buy low, sell high”—though it feels counterintuitive in the moment.
Third, ensure you’re properly diversified. If you’re heavily concentrated in a few technology stocks, this selloff highlights why diversification matters. A well-balanced portfolio should include domestic and international stocks, bonds, real estate, and other asset classes that don’t all move in lockstep.
The Bottom Line
Market volatility is the price of admission for long-term investment returns. While a 20% decline in any sector is never pleasant, it’s not unprecedented, and it doesn’t necessarily signal the end of technology’s role in the economy. For retirees, the key is ensuring your portfolio matches your risk tolerance and time horizon, maintaining adequate diversification, and resisting the urge to make emotional decisions during market turbulence. If this downturn is causing you sleepless nights, that’s a signal worth heeding. Rather than selling in a panic, use it as a prompt to work with your financial advisor to adjust your allocation until you can rest easy, no matter what tomorrow’s market brings.
Have a blessed week!
Joe Shearrer
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged and may not be invested directly. Investing involves risk including the loss of principal. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.