How might retirees combat the risks associated with market downturns?

Ensuring a diversified portfolio is a fundamental strategy for retirees to mitigate the risks associated with market downturns. A diversified portfolio spreads investments across various asset classes (such as stocks, bonds, and real estate) and sectors. This distribution helps balance risks; if one asset class performs poorly, others may perform well and offset potential losses.

By holding a mix of asset types, retirees can benefit from the overall growth of their investments while reducing exposure to any single economic event that could negatively impact their portfolio. Diversification allows retirees to maintain a level of risk that aligns with their financial goals and risk tolerance, which is particularly important as they often rely on their investment capital for income during retirement.

The other strategies mentioned, such as withdrawing all funds immediately, investing solely in high-risk stocks, or avoiding all investments, are generally not advisable as they can lead to greater financial instability and missed growth opportunities over the long term. Retirees should instead focus on a balanced investment strategy that supports their financial needs while managing risks effectively.