After five consecutive years of stock market advances, 2008 has certainly proved to be a difficult investing environment This is the not the first time we have experienced down markets but this one might seem different due to recent velocity of the down turn in the market.
The markets will rebound from this, over the lifetime of any investor, there is only a handful or so of excellent entry points into the market which can act as a springboard to propel future portfolio success 2008, as difficult as it is to go through, this is one of those periods I am sure you have heard the old adage, now is the time to put those words into action.
One of the many benefits of the 401k program is that it allows you to make relatively small purchases on a weekly or bi-weekly basis allowing you to purchased mutual funds shares at one of the best values ever.
In the midst of these difficult financial conditions, it is best to maintain a well-diversified portfolio and to revisit the time frame when you need the money.
What follows is a general rule of thumb but remember you should be looking at how many years you will need the income not just how years it is until you start taking income.
If you are with in 2-3 years of retirement try to set aside several years of what income you will need in the money market or stable account.
Over the next several quarters there will be times when the stock market goes up, use these as opportunities to sell a portion of your stock mutual funds within your 401k plan and move that to a money market or stable value account so that you are more comfortable leaving the balance of the money in the stock market, giving the stock mutual fund time to recover.
Repeat the above process each time the stock market increases in value until you have adequate amount of money in the money market for the next 2 to 3 years income.
If you are with in 3 - 5 years of retirement, you may have learned that your tolerance for risk has changed in the face of recent market events.
Or, you may have new questions in the face of these short-term losses and want to reallocate your overall investment strategy of your portfolio.
This is really not the time to be making a whole sale changes to your long term goals.
You will have many opportunities in the next 3 to 5 years to do that when the stock market is up.
If you are more than 5 years from retirement, do not let the current market conditions concern you, this will pass.
Concentrate on purchasing share a these low prices and then reevaluate your allocation when the market conditions are better.
I urge patience and calm.
We will come out of this crisis intact and return to rising economic growth and financial market stability.