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Posted on September 18, 2008

Wall Street Woes and Retirement Investing: Keep a Level Head

The recent wild gyrations—mostly downward—of stock market prices have badly shaken many future retirees. Some have seen their nest eggs drop precipitously, and are wondering what to do.

Our advice: whatever you do, don’t panic. Attempts to “time the market,” i.e. to “buy low and sell high” usually fail, for two reasons. First, there is no reliable way to predict what the market will do next no matter what the situation. (If there were, anyone who possessed it could quickly become a billionaire.) Second, emotions tend to cloud judgment, making matters even worse. Right after a big dip, many investors are tempted to bail out at what often turns out to be the worst possible moment (think of the people that sold stocks in 1932, which was the best buying opportunity of all time). Similarly, when markets go up, up, up, there’s a big temptation to buy at what may well be the peak.

If you decide that the market’s volatility is unacceptable to you, you may wish to reallocate some of your assets. This usually means exchanging riskier investments for safer ones: selling stocks and buying fixed-income investments. Shop around for the best rates on CDs or bonds. Then take a calm look at your stocks and stock mutual funds, and decide how much you wish to sell. If it’s a large portion, consider selling gradually, and transitioning into fixed income investments. But don’t engage in “panic” selling. In uncertain times, more than ever, you need to keep a level head.

One Comment on “Wall Street Woes and Retirement Investing: Keep a Level Head”

  • Yeah your right. But its not easy to keep a level head when your watching your 401K go right down the tubes…

    Posted by Janine on October 1, 2008 at 9:57 am

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