You Can Ride It Out, Baby

By Michelle Singletary
Thursday, January 24, 2008

Every January, my husband and I update our finances, but this year's review nearly sent me over the edge.

Last week, as we were tabulating our assets, I looked at the latest statement from my 401(k) retirement plan. In the first 18 days of this year, the portfolio had lost -- at least on paper -- more than $30,000.

Beginning to panic, I started pulling the statements on our other investments. More bad news. A fund we use to save for our children's college expenses was down by about $8,000. My husband's federal government Thrift Savings Plan had dropped about $20,000.

"Honey, we've got to do something," I said, worry rising in my voice.

That feeling of alarm is one shared by many investors these days, as markets around the world tumble. The Dow Jones industrial average, the Nasdaq and the Standard & Poor's 500-stock index have all been dropping at alarming rates. Such huge losses can shake even the most informed, experienced investor.

Probably more than many investors, I understand that markets go up and down. Sometimes the down is drastic. I know that. Still, I could feel my blood pressure spiking. I was panicking.

Many experts warn against panic in the face of an unsteady market.

"Pulling your money out when everything is tanking is just not a good idea," says Don Blandin, president and chief executive of the Investor Protection Trust, a nonprofit investor education organization.

If you don't need your money for years to come, then stay the course, Blandin and many other experts advise. Even if you're close to retirement and you haven't rebalanced your portfolio in a while, you may still want to sit tight "until the dust settles," Blandin said.

Historically, annual returns from the U.S. stock market average a little more than 10 percent, assuming you reinvest dividends. So we are reminded not to let the daily shudders of the markets scare us.

But how can the latest losses not scare you?

For many of us first-generation investors, this isn't about having enough money to buy a more expensive car or a second retirement home. For many, this money simply means being able to retire comfortably -- before we need a cane. It means being able to pay for a child's college education, sparing the family an onerous debt burden.

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