Monday, October 13, 2008

Hang in There

The instability of the financial landscape over the past couple weeks has been rather unsettling, but it should really not be a huge surprise to anyone. Things like this happen.

I mean, a year ago, the Dow was over 14,000 points, and everyone was thriving. But, we all know that the stock market has its ups and downs, and after a prolonged period of artificial highs, the market always adjusts to correct itself.

That means down times. Slipping prices. And, at times, plummets in your 401K or portfolio.

I have listened to both Clark Howard and Dave Ramsey this past week, and they are in complete agreement on how to handle our current "crisis": just hang tight.

Howard and Ramsey each have said that everyone should continue (or start) to contribute to their retirement plans and mutual funds. The low times are the BEST times to buy!

Remember, if you have stocks or mutual funds, you own shares. Your shares hold certain values at certain times, depending on the market. You have not "lost" any money UNTIL you sell and "cash out" at a lower rate than what you initially paid for your shares.

So, here's a good question: Why in the world would you sell stocks and funds now? Why would you cash out at a time when stocks are 35 percent lower than they were a year ago? You don't! You buy!

Even if you are no longer contributing, Clark Howard says to stay the course. He points out that despite the volatile nature of Wall Street, we really only see a handful of huge gains throughout the year. And, we can rarely predict when these dramatic spikes will happen. So, Howard strongly advises people to keep their money where it is, because if you take it out, you are likely to miss the GREAT days that really create those big jumps in the value of your funds.

Here's a headline that I just read from today's news:

Dow posts big gains in early trading

If you were one of those who pulled your money out last week, you missed out on the 311 point surge the Dow had immediately after opening this morning (we'll see where it ends up at the end of the day).

Here's some advice: do not look at your 401(k) statement more than once per year. Especially if you are under 50 years old. You will have your money there until you are at least 59 years old, and perhaps until 63 or 65. So, it doesn't matter what happens right this minute.

Just hang in there. And buy-buy-buy!!!

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