The stock market's stomach-churning drop in the last month may be prematurely aging you, but financial experts say to keep cool and stay the course despite the turmoil.
Sure, the Dow lost some 800 points in the last month alone and the Nasdaq is off about 10 percent from its recent peak. This comes as lawmakers haggle over averting January's "fiscal cliff" of spending cuts and tax increases. It's all fueling uncertainty that's causing investors to sell and employers to hold off on hiring and spending.
Meanwhile, last week's spike in people filing for unemployment benefits, Europe's slide into another recession, and renewed fighting in the Mideast are also disturbing the market.
And financial planners want you not to freak out?
That's easier said than done. But you don't want to look back weeks or months from now and find that assets you sold at today's sagging prices have recovered and continue to head north. Retirement investment strategies are built on sound strategy and decision-making over a lengthy period of time, experts say, not reaction to the market's day-to-day ups and downs.
Stuart Ritter, a senior financial planner for T. Rowe Price in Baltimore, recommends that investors "sit tight and do nothing," because trying to time the market — selling assets now and guessing when to buy again — doesn't work.
"Sell now and you lock in the loss. We saw people do that in 2008 and 2009; they sold right before the market went up and missed out on those gains," Ritter says. "We remind people that we don't know where the market is heading, only where it's been. If your reaction is to say, it's gone down, it will keep going down, remember the market goes up twice as frequently as it goes down."
To amass enough money to finance 20 to 30 years or more of retirement, you need a well-diversified portfolio with a mix of stocks to drive growth, Ritter says. But if you're too jittery for that and move into slower-growing, less volatile bond funds, you'll need to increase your savings rate and curb spending to offset what you won't be making with stocks.
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