University of Illinois Extension

Saving and Investing in Turbulent Times

When the stock market plummets or you hear the word “recession,” you may begin to question how your money is invested. Maybe you need cash for current expenses, or you’re tempted to sell investments before you lose any more money. There are a number of issues to consider. Here are ways to help you evaluate your options before making a decision.

Ask Questions

What’s your situation?

Before deciding how to handle your investments, ask yourself…

You are thinking about stopping contributions to your retirement plan because your investments are doing so badly.

  • Are your investments diversified, or concentrated in your employer’s stock?
  • Do you have a sufficient emergency fund?
  • Did you select these investments as part of an overall plan?

You are retired, or planning to retire, and you planned to sell some investments each year to generate income.

  • Do you have savings to cover expenses for a year or two, to give your investments a chance to recover?
  • Could you return to work, or continue working, in order to delay tapping your investments?
  • Can you cut expenses so that you need less income?

Your child is starting college, and these investments were intended to pay for college expenses.

  • Do you have savings to cover the first year or two, to give your investments a chance to recover?
  • Can your child attend a less expensive school for the first year or two, or work to pay part of the costs?

The value of your investments has dropped a lot. You’re nervous and wondering if you should sell and put the money somewhere safe.

  • What would be the downside of selling now?
  • How will you feel if you sell, and miss the rebound of stock prices?
  • How long will it be until you need to tap these investments?
  • Did you select these investments as part of an overall plan?

A lot of your money is invested in your employer’s stock, through your 401(k), employee stock purchase plan, or stock options and other special programs.

  • If the stock value drops and doesn’t recover, how would that affect your overall financial security, your retirement, or other financial goals?
  • What would happen if you lost your job and the stock lost much of its value at the same time?
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