Retirement expert: 'Cashing out is the worst thing you can do'

With a volatile stock market, inflation still rising, and the Federal Reserve raising interest rates, many worried investors may want to cash out of their retirement accounts before suffering further losses.

Don't do it, Relevé Financial Group Founder Dawn Dahlby told Yahoo Finance Live (video above).

"Cashing out is actually the worst thing you can do," Dahlby said. "For example, if you look at the S&P 500 over the last 20 years, it's returned over 9% on an annual rate of return."

Dahlby told Yahoo Finance Live that many investors don't benefit from that large return on investment because they leave the market during a downturn. She advises investors to have patience to ride out the downturn until the market inevitably recovers.

"It's about not timing the market, but it's the time in the market," Dahlby said. "Real people that are building real wealth are the people that go against the herd and stay invested when it doesn't feel comfortable."

While it may seem counterintuitive to take on more risk in your portfolio during a bear market, Dahlby recommends that investors follow a certain formula that her investment firm uses to diversify their clients' portfolios and cope with inflation.

"We take the number 110 minus the clients age and that's how much they should actually have in stock or equities," Dahlby said. "And by doing that, that's going to give them a potential better opportunity to earn more in their portfolio over the long haul and keep up with inflation."

She also recommends that investors get advice from financial advisors about adding assets in their retirement portfolios other than stocks to keep their retirement accounts healthy.

"A diversified portfolio is one that holds a portion of their overall portfolio in stock and a portion in fixed income. Another thing that clients can do right now is taking a look at alternative investments," Dahlby said. "Alternatives — whether it's commodities, or real estate, or structured notes, or private equity — there's opportunity out there."

Ella Vincent is the personal finance reporter for Yahoo Money. Follow her on Twitter @bookgirlchicago.

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