Every crisis is an opportunity. The massive turmoil on financial markets so far this year is no exception. Here are three things that every middle-class American can do with their 401, IRA or other retirement plans, right now, to take advantage of what’s going on.
It’s not perfect, of course, because things have fallen different amounts. Nonetheless, among major stock indexes the S&P 500 SPY, -0.30% has fallen 21%, while international developed markets VEA, -0.91% are off 19% and emerging markets VWO, +1.45% 15%. U.S. small-caps as measured by the S&P 600 IJR, -0.31% are down 19%. International and emerging small-caps VSS, -0.64% by 22%. Regular bonds AGG, -0.59% have fallen 13% in price, inflation—protected bonds TIP, -1.37% 12%.
The simplest way to take advantage of this meltdown? Go to a brokerage or bank, open an investment account for any minor children or grandchildren, and deposit as little as $1,000 on their behalf into some low-cost index funds. Just iShares Equal Weight U.S.A. EUSA, -0.46% and Vanguard FTSE All World ex-US VEU, -0.22% cover the universe, for less than 0.1% a year. The long-term returns from stocks have averaged 5% a year on top of inflation.