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Plan Well, Retire Well

Saving and investing your money

Recession? Depression? Or just a volatile market? Here's help for your upset stomach.


Unless you've been living in a cave for the last little while, you cannot have missed all the stock market news. I'll leave it to the media and economists to debate the likelihood of a recession and to make predictions about the future. I want to talk about how this is affecting you as an investor.

How's your stomach for this kind of investment risk? And are you doing the right things to manage your fear? In the February Money Magazine, several experts were asked how they are dealing with this volatile market. I really like some of the answers, such as not watching the financial news on TV.

I will second that idea. Don't immerse yourself in news about financial markets. It's great to educate yourself about financial issues, but that's not what you're doing when you're checking your stock's price on your cell phone every 30 minutes and watching CNN nonstop. Paying too much attention to minute-to-minute shifts in the market is NOT going to make you a better investor. It's going to make you more nervous, and nervous investors make bad decisions.

Let's assume that you actually had a plan when you chose your investments. You decided what proportion of your money would go into large US companies, small US companies, foreign companies, bonds, and a money market fund or savings account. You know the stock market goes up and down. So the best strategy is probably just to grit your teeth and stick with the plan. If you give in to your panic and sell, you will be creating a problem rather than solving one. If you sell, you'll have cash on hand that you'll have to decide what to do with. What will you do? Sock it in some savings account paying 1% interest until you have enough confidence in the market to reinvest? Great. You sold your investment when prices were low, and now you're going to buy back inafter prices have already increased. You'd be better off just to sit still and do nothing. Pick a time each year to review your investments and rebalance if the proportions of stocks, bonds, etc. have gotten too out of whack. Other than that, hand's off.

What if you didn't have a plan about how you chose your investments? Then you need to learn the basics of investing, starting with diversification. Our team of educators can help. Register to use our free website, Plan Well - Retire Well, and watch the audio/PowerPoint segments about investing. We're educators, so there's no product being pushed and no questions about conflicts of interest.

And if you've got an upset stomach from all the financial news, take some antacid and change the channel to a comedy show.

Comments? Email us at RetireWell@uiuc.edu.



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