Let's get right to the matter at hand: Are you prepared for a market apocalypse?

Waiting ...
Actually, don't answer that. We have a pretty good hunch. Just have a look at the results of a recent survey of American workers:

  • 22% of workers say they have no savings of any kind.
  • 49% of workers say they have savings/investments of less than $50,000, excluding their primary residence.
  • 82% of workers feel less than "very confident" that they have enough money for a comfortable retirement. That's nine percentage points more than last year and is the biggest gain in the 18-year history of the survey.

The majority of our compatriots aren't prepared for a market hiccup, much less a market apocalypse!

This dawned on us last week when we stumbled upon a worried investor on our Fool discussion boards. "I'm turning 34 in two months and I'm kinda freaking out about my retirement," he wrote.

There's more to his story, but let's stop at the obvious: He's barely more than halfway to age 67, yet the effects of the current market (and economy) are freaking him out.

If you're actually in retirement or are nearing retirement, you likely now have much less than you thought you did. Looking at the funds in our own 401(k) plans, every single one of them was down in the first quarter -- save one that holds Treasuries and another invested in low-risk bonds (although, given rapidly rising food and fuel prices, the paltry positive returns offered by these two asset classes probably aren't helpful anyway).

And heaven forbid you need cash from your individual stock holdings -- you're probably down even more. Even "reliable" large companies with outstanding 10-year returns have offered no shelter from this market environment:


Trailing 10-Year Return

Trailing Six-Month Return

Yahoo! (Nasdaq: YHOO)



Amazon.com (Nasdaq: AMZN)



Adobe Systems (Nasdaq: ADBE)



Valero Energy (NYSE: VLO)



SanDisk (Nasdaq: SNDK)



Autodesk (Nasdaq: ADSK)



Tiffany (NYSE: TIF)



Data from Capital IQ, a division of Standard & Poor's.

In some cases, your retirement savings may be down as much as 35%!

Double uh-oh
In tough times like these, it's easy to panic and make bad decisions, like selling a down stock that still has sound fundamentals. Your golden years are on the line, after all. But drastic decisions like that will only compound your predicament.

Like quicksand, the more you try, the worse the situation can become.

And while there is no way to prevent market volatility, the right investing plan can prevent market volatility from rattling you and your portfolio too violently.

Here's how
First, you want to have an asset-allocation strategy, one you understand and have confidence in. Which strategy you choose will depend on your timeline and risk tolerance.

If you're young, with many years of investing ahead of you, your portfolio will skew heavily toward stocks and potentially small-cap stocks -- which have historically offered superior long-term returns alongside greater intra-year volatility.

If you're in or near retirement -- meaning you need your savings to be liquid and hold your value -- your portfolio will have a heavier allocation toward Treasury bonds, which offer neither tremendous upside nor tremendous downside.

The exact numbers will depend on your specific situation, but our Motley Fool Rule Your Retirement service has established the following asset-allocation guidelines:

Asset Class




Large-Cap Stocks




Small-Cap Stocks




Foreign Stocks












Source: Motley Fool Rule Your Retirement.

A good start
Once you have your plan and know why you have it, it's time to believe in it. That means tolerating the excessive volatility in stocks when you're a young, aggressive investor and not ruing the gains you're missing out on when you're a conservative investor parked predominantly in bonds.

Only then -- when you have both the proper plan and the proper mindset -- will you be prepared for a market apocalypse.

Make it yours
The best asset-allocation plans don't stand on rough approximations alone. They're custom-built strategies unique to your specific financial situation.

So if the current market has you worried and you're looking to put your money and your mind in a better place, consider joining Rule Your Retirement to take advantage of all of the advice and portfolio planning tools the service has to offer. Even better, you can check it out free for 30 days.

Click here for more information.

Neither Brian Richards nor Tim Hanson owns shares of any company mentioned in this article. Brian and Tim don't really like the smell of napalm at any time of day. Amazon is a Motley Fool Stock Advisor recommendation. The Fool has a disclosure policy.