#8167 Feb 6, 2008
Wednesday, February��6, 2008
Moneyadvisers: There's no need to panic
By Matt Millham, Stars andStripesMideast edition, Wednesday, February 6, 2008
Karoline Hay knew Wall Street was in turmoil, but still the figurehighlighted last month in her quarterly 401(k) statement . indicating a loss onher investment . threatened to unravel her concept of investing."I looked at the last statement and went, `No, that's not how that works,'"said Hay, a 29-year-old military contractor who works in Mannheim, Germany."I invest money, it goes up; that's how that's supposed to work."The shock wore off quickly. Already she's trying to figure out how to squeezea few more dollars from her budget to drop even more money into the market.It's not that Wall Street's woes have worried her a little bit, but she'soperating under the notion that "if you just ride it out, eventually it'll workout," she said.Hay has the right idea, according to investment advisers and educators in themilitary and the private sector."It is natural for the market to cycle," said Bill Wolf, who teaches financeand investment classes for the U.S. military community in Heidelberg.What people have to keep in mind is that, historically, markets have gone upover time, he said.As long as a young investor . be it a troop in the Thrift Savings Plan or acontractor in a 401(k) . has their investments allocated to match their risktolerance, "the current market turmoil should not cause panic," Stephen M.Horan, head of private wealth and investor education at the CFA Institute, wrotein an e-mail.Though it might be hard to get over the mental hurdle of plunking cash intothe market, Horan, Wolf and others say that if young troops or civilians aren'tin the market yet, they should be."The more time you have to take advantage of compound interest the better,"Wolf said.Both Wolf and Horan advise against trying to time the market . the practiceof trying to dump money into the market when prices are cheap with the hope ofselling high . in favor of consistently investing the same amount on aconsistent basis, as in dollar-cost averaging.According to Horan, the volatile financial markets have created anopportunity for young investors to make even more money for retirement."A young troop following a dollar-cost averaging strategy . will actuallyaccumulate more wealth for retirement if prices are volatile because they willbuy more shares when prices are low and fewer when they are high," he wrote.Both men say it's important to get the mix of investments right.For younger investors, it usually makes sense to take on a little more risk,for the hope of higher rewards. But as you get older, your assets should shiftto more predictable investments, such as bonds, Wolf said.Hay, who said she's a long way from retirement, said she's been moderatelyaggressive in her investing so far, and hopes to get into more volatilecommunications and technology stocks later in the year."I don't expect to tap this out for about 35 years," Hay said. "I'm not tooterribly worried about it."
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