Don’t even try to time the market

Dear Liz: The investments in my 401(k) have dropped more than 20% over the last year. My investments are mainly in stocks because I am relatively young (32), though I recently rebalanced to include some Treasury bills. Most of the investments offered by my company’s 401(k) plan have been falling precipitously in recent months. Do you have any advice on how to better manage the drop? I’m not worried about it short term, but shouldn’t we periodically adjust our investments given the economic climate to maximize returns or at least avoid what will likely be a falling stock market in the short term?

Answer: When you find a crystal ball that will let you do that, please share it with the rest of us.

Seriously, those who try to time the markets by “adjusting” their investments usually wind up selling low and buying back in when stock prices are higher because they miss the subsequent surge. If you’ve got decades until retirement, it doesn’t matter what the stock market does day-to-day or month-to-month. What matters is that historically, stocks have beat out other investments over the long term.

If you don’t have a plan, consider consulting a certified financial planner or checking out online solutions such as FinancialEngines.com.

Liz Pulliam Weston is the author of “Easy Money: How to Simplify Your Finances and Get What You Want Out of Life.” Questions may be sent to 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604, or via the “Contact Liz” form at www.asklizweston.com. Distributed by No More Red Inc.