When the market goes haywire, what's a saver to do?
Posted
Sep 19 2008, 02:02 PM
by
Karen Datko
Rating:
With the stock market's crazy ups and downs, we decided to see what some clever personal-finance bloggers are doing with their retirement and nonretirement accounts.
Does the phrase "stay the course" ring a bell? For instance, after some heavy-duty thinking, Nickel at Five Cent Nickel and Mr. ToughMoneyLove are changing nothing about their investment strategies.
Nickel acknowledges that his investments have "taken a beating" and that his asset allocation has shifted. But he's continuing his automated monthly deposits to his retirement and nonretirement accounts. He says, "The money that we have in the stock market is intended to be there for the long term so, thus far, we've only experienced paper losses."
Based on his review of his investments, historical research and reading about what many financial advisers recommend, Mr. ToughMoneyLove says that "maybe doing nothing is actually doing something -- a legitimate strategy. Perhaps I should just close the books on my decision and worry about college football for the rest of the week." (You can also read his entertaining critique of the federal government's latest intervention plans.)
Our partner blogger J.D. Roth at Get Rich Slowly is sticking with his fundamentals, which include "Don't panic" and "Tune out the media." He also recommends that you read advice from Ramit Sethi at I Will Teach You To Be Rich, who wisely observes: "Nobody has The Answer about how bad this will get and how long it will go."
Nickel's readers offered plenty of comments, and many agreed with his approach. Some said they wish they had more money to invest right now. "If I had some extra cash reserves laying around, or even if I had an emergency fund, I would throw some extra money into the stock market," "Start-Up" said before breaking into song with "Tiiiiiiiiiiiiiiiiiiiiiime is on my side. Yes it is."
Chad from Sentient Money has a different approach. About 60% of his investments have been in cash since last fall. "Welcome to the worst recession since the '70s," he says. "More banks will fail, so don't be surprised." (Want to know if your bank accounts are safe? Nickel has a post that explains how to do that.)
If you likewise can't stomach risk, our partner blogger Trent Hamm at The Simple Dollar offers a tutorial about Treasury securities. He can tolerate risk, and maxed out his Roth IRA contribution on Monday.
Another Nickel reader, "Kev," is focused on strengthening his own financial house: "Pay off debt. Rebuild EF. Pray every night that I remain employed."
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