Monday, June 2, 2008


Here’s a stark reality. In times of economic stress and uncertainty like we’re experiencing today, most people have a burning desire to do, with their retirement savings (i.e. long term savings – at least 5 years) exactly what they shouldn’t do. What’s that? A) pull their retirement portfolio (hopefully, a well diversified group of mutual funds) out of the stock market; B) place these savings in a safe haven – such as cash reserves, treasury bonds (or, in extreme cases, under their mattress), and then, C) refuse to invest these savings back into the market until the market has ‘hit bottom.’

What’s the problem with this practice? The overwhelming majority of investors, do not know when the market has “hit bottom.” The result? By the time you figure out it has hit bottom, the market has already begun and made a large portion of its recovery; however, your retirement investments, sitting on the sidelines in “safe” investments” will (by the time you’ve figured it out) miss a large portion (and, in some cases, a very large portion) of the recovery.

So, what should you do with your retirement (i.e. – long term – 5 years or more) savings during difficult economic times like these? Exactly the same thing you should do during mediocre or good economic times: Check your retirement savings once (or twice, at most) per year to be sure they are invested in a well-diversified portfolio of mutual funds (if you’re not sure where to start, check the BestMoneyinfo Mutual Fund List – click on the “Best Money info” icon on this page to access – and then, do nothing!

And, if you find that hard to do, remember this. The only time you gain or lose on your investments is when you cash those investments in. So, since retirement investments are generally long-term investments (which means you won’t be cashing them in for a long period of time, during which time the portfolio, if well invested, will likely fully recover from any downturn and then continue to grow), in actuality, you really haven’t lost anything.