Playing It Safe, Missing the Deal of a Lifetime?

Feb. 10, 2009 — -- Like most of us, the investor below is worried about the status of her retirement accounts given the depressed state of the markets and the economy. She made a move she thinks will keep her safe during these turbulent times. But in reality she could be missing the opportunity of a lifetime.

Question: I am a lucky one, in that my job should be secure during these troubled times. I invest 3 percent of my wages in a deferred compensation plan (no employer match). I just stopped contributing to the mix of mutual funds they are in now and had all of my future contributions re-allocated to the stable income fund. I left the existing balances in the current mix of stocks funds they are in now (foreign, large cap, mid cap and small cap, with a small amount in a bond fund and a small amount in the stable income fund.) Was this wise for the time-being? It doesn't seem like the market will rebound any time soon.

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Also, I have a separate Roth IRA account that has been in the toilet for years. I moved it from Schwab to Smith Barney about a year ago. It's in a mix of American funds and other funds through Smith Barney.

I have no idea what I should, or should not, be doing in this market. I am 49 years old, and will probably work until I am 66. I also have a pension where I work. My husband is self-employed; we have rental property he manages. His retirement accounts are minor. We have two boys, ages 6 and 10. Thanks.--B.R., Geneva, N.Y.

You're right, B.R. It sounds as if you are among the lucky ones as we cope with the current financial turmoil. I hope your good fortune continues.

But based on the information you have provided, I'd consider taking a different approach to the deferred compensation plan you participate in through work. Rather than dump all future contributions into the stable-income fund, I'd go back to contributing to a mix of the available stock, bond and stable income funds.

The reason is you're missing out on an opportunity to invest at low prices.