5 Ways To Protect Your 401(k) From the ‘Trump Volatility’
Written by
John Schmoll
Edited by
Jenna Klaverweiden
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Volatility in the stock market understandably rattles many investors, afraid they’ll lose a substantial part of their portfolios.
Since President Donald Trump returned to office in January 2025, stock market turbulence has been at the forefront of many people’s minds. Americans dealt with this especially after the brief but steep tumult in April 2025 over Trump’s “Liberation Day” tariffs. Here are five ways to protect your 401(k) from “Trump volatility.“
1. Don’t Panic
Panic is rarely a good thing when it comes to investing. Acting on panic can cause you to sell holdings that will likely rebound over time. The upheaval in early 2025 is a good example of this. The S&P 500 dropped 11% between April 2 and 8, 2025, per the Council on Foreign Relations, only to bounce back and more.
Personal finance expert Suze Orman believes acting on this panic is shortsighted. “I hope you resisted any urge to sell stock holdings during the worst of the market declines earlier this year. Once you lock in lower values, you can’t easily make them up. And the markets have delivered a quick reprieve: those early losses have been made up,” Orman said in an article on her website.
Staying out of the headlines is a good way to stymie the panic.
2. Properly Diversify
Investing heavily in growth stocks is an exciting way to possibly experience exponential growth. The flipside can also be true if you’re not careful. Although not always exciting, proper diversification is a prudent way to protect your 401(k) from wild swings.
Diversification doesn’t prevent losses, but it can reduce the likelihood that losses will dominate your 401(k). Investing in a healthy mix of stocks and bonds in your 401(k) is a good way to protect your portfolio when markets become tumultuous, according to Kiplinger.
Most 401(k) plans offer access to a broad base of funds, as well as tools to help you create a diversified portfolio.
3. Rebalance on a Schedule
Rebalancing your portfolio is a long-held approach to managing a 401(k) or IRA. Experts recommend rebalancing once or twice annually to ensure your holdings don’t drift too far from your desired asset allocation.
“Trump volatility” can make it feel like you should rebalance more regularly. Doing so can be problematic, as it may erode gains and increase transaction costs. Many 401(k) plans offer automatic rebalancing as a feature; stick with that to keep your portfolio on track.
4. Have a Fully Funded Emergency Fund
It’s not uncommon for wild market swings to leave some needing to borrow money. Americans can take a 401(k) loan to borrow money from their retirement savings. Such loans have legitimate purposes, but taking one during a downturn can cause various problems.
Not only can they cause early withdrawal penalties, but they can also lock in losses. Having a fully funded emergency account is a perfect way to offset this risk. It’s best to keep these funds in a high-yield savings account to maximize interest earnings.
Furthermore, an emergency fund is a helpful tool for protecting your overall financial well-being.
5. Invest Consistently
Understandably, volatility can drive Americans to put off investing until calm returns. For the forward-thinking investor, volatility is as good a time as any to continue investing through their 401(k) plans.
Continuing to invest during volatility is a good strategy, and it may get you a higher-quality holding for cheaper, according to Fidelity. Many 401(k) plans include an auto-increase feature, or allow you to add cash to your plan to buy more shares. Over the long term, this can help increase profits.
Stock market volatility is worrisome for many Americans. Thoughtful action and calm nerves can go a long way to protect your 401(k).
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Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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