The subprime mortgage mess has firmly spilled over into the average investor’s pocketbook.  The Dow Jones Industrial Average dropped over 340 points today before recovering to opening levels.  Even so, uncertainties about big lenders, namely Countrywide, have lots of smart folks pretty shaken up - and the major indices are down over 4% this month alone.

Time to cash out your 401(k) and go live in the mountains?  Not quite.  Selling your investments after a major correction is not going to help you in the long term, assuming that you are invested for the long term.  Over time, the stock market trends upwards.  If you have invested in a nicely diversified portfolio of domestic large cap, small cap, international stocks, real estate and commodities, the gains to come over the next 30 or more years will wipe out any pain your portfolio may be suffering today.

I would even recommend that you take advantage of the depressed market prices and add to your investments.  If you haven’t yet maxed out your Roth IRA or 401(k) for the year and have the cash available to do so, now may be an excellent time to load up on relatively inexpensive securities.  The market may continue to drop short term, but again, the long time horizon that we young people have until retirement affords us the luxury of riding out these downtrends.

Did you enjoy this article? If so, please subscribe to the RSS feed, or enter your email address below to subscribe to the daily email digest.
This entry was posted on Thursday, August 16th, 2007 at 2:11 pm and is filed under Investment. You may e-mail this post to a friend. You may print this page. Responses are currently closed.