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Color of Money: I feel you about the stock market swings

Michelle Singletary on

Jeanne Thompson, senior vice president of Fidelity Investments: "When the market is down and you are continuing to contribute on a regular basis, you're buying in at a lower price, and you are taking advantage of dollar-cost averaging. When the market goes up, you know you're realizing the growth from the market as well as from your contributions."

Don't get so scared of what's been happening that you pull back from investing. What you should be fearing is inflation. Your money has to grow to keep pace with the future costs of goods and services.

Thompson pointed to research from Fidelity, which looked at 401(k) investors who got spooked during the 2008-09 financial crisis and moved their money completely out of stocks. Their average starting balance was $89,000 when the crisis started. As of the second quarter of 2017, their accounts had grown 157 percent to $223,000 -- mostly because they continued to contribute. But 401(k) investors who had an average balance of $79,000 and stayed put in the stock market saw their account balances increase by 240 percent to $267,000. The latter group started with less but ended with more because of market growth and their continued contributions.

Here's some age-based advice for investors no matter what the market is doing.

If you're in your 20s, 30 or early 40s, don't be afraid to be aggressive. "As long as you don't look at your portfolios all the time and this is truly savings for when you are older, you can afford to be risky," McClanahan said. "Don't look at the market except to occasionally rebalance."

"Invest in low-cost exchange-traded funds and/or index funds and don't react to market volatility -- time is on your side," said Garrett Oakley, certified financial planner, certified public accountant and financial planning professional at the automated investment firm Betterment.

If you're in your mid-40s to 50s, stay the course. You still have a lot of years ahead if you plan to retire in your late 60s, Thompson said. You don't want to be too conservative, she said.

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If you're in your late 60s and/or retired, evaluate how much risk you can tolerate.

"Too many people are too aggressive when they are living off their retirement savings," McClanahan said. "Make sure you aren't taking more risk than you can afford."

Feel what you feel, but keep in mind that your feelings aren't facts. And the fact is the economy is still strong -- so, as jittery as the market might be, there's no need to act in a panic.

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Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

(c) 2018, Washington Post Writers Group


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