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Retirees nervously watching markets

October 8, 2008 12:00:00 AM PDT
The Dow Jones has lost more than 1,000 points in the past week. And for millions of Americans, that translates into *real money lost from retirement accounts. So what should people do?Whether you're in retirement right now or you are on your way to retirement, you have probably noticed your IRA and 401(k) accounts are much less than they were a year ago. At this time last year Wall Street was celebrating the fifth anniversary of a bull market, which was actually a good time to sell. Now we're in a deep bear market and that usually means it's a time to buy, but panic gets in the way of a good decision.

The stock market couldn't be more volatile. Just today it was down over two hundred points then it it was up over a hundred then down again, then up again

But finishing down nearly two hundred points.

Moves like that would make just about any investor nervous.

But professional financial specialist and certified public accountant Mitch Freedman says it's definitely not a time to panic.

"We've had these kinds of cycles numerous times over the years, and this is just another one of those cycles," said Freedman.

So Mitch does recommend one strategy, especially if you're an older investor, don't re-invest your dividends and interest, keep it in cash.

"They put that money aside for liquidity so that when the time comes for them to withdraw funds out of those accounts in order to meet their day to day needs, then they don't have to sell as much of their securities at reduced prices," said Freedman.

And when the market does turnaround, it could happen rapidly making it even more difficult, if not impossible, to time the market to buy or sell.

"In order to be a successful market timer, you have to be correct two times. You have to buy at the right time, and you have to sell at the right time," said Freedman.

So what's the answer? Keep on investing.

"Even though the prices are going down, with dollar costs averaging each time they're investing in securities, they're buying more shares," said Freedman.

More shares eventually will mean more money. Although the market could turnaround quickly that doesn't mean things will get back to normal quickly. In fact, investors may have a long wait to recover all of their losses.

 

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