About A Wealth of Knowledge
Financial expert Michelle Singletary answers questions about personal finance and the economy.
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Your 401(k) in a Rocky Stock Market
Q: With drops in the stock market, what is the best way for me to deal with my 401(k)?
A: I know these are tough times for investors. Seeing triple-digit drops in the stock market is enough to make you clutch your heart like Redd Foxx used to do when he played Fred Sanford in the '70s sitcom Sanford and Son.
But, despite the market tumbles, if past performance is any indication, it will go up again. Of course the question is when.
Nobody knows when the market will recover. So the thing is to stick to a good investment plan. If you have a decade or two to go before you need to retire, don't lose faith. Think of this time like a closeout sale. You can get shares of good companies on sale. This is a good time to buy but you need to be sure you are buying right.
Diversification is the key word in this market. And all that means is making sure you are investing the money you are putting in your 401(k) in various asset classes, overall stocks and bonds. You want to be sure your retirement account has shares of large, medium and small companies. The longer you have until the retirement, the more stock you might want to own within that portfolio.
Talk to a representative of the company managing your workplace 401(k) plan to get more specific help.
And if it helps, I haven't stopped contributing to my retirement plan, even though I'm experiencing the same losses as everyone else. But, if you jump out, know that those losses, which are only on paper now, will be locked in.