Hobson answered: Hello Louise, my advice to you is to sit tight. Think of the stock market as on sale right now. You can take advantage of the low prices and find some great, solid companies selling at a discount. One of my favorite sayings is that bull markets always follow bears. After the last bear market, stocks zoomed up almost 33 percent just one year later. You do not want to miss out on this rebound.
Tim, from Duncan, Okla., asked: I work for a major employer and invest in The Stock and Savings plan and 401K Plan. 401K diversification is my main concern. Mutual Funds, stocks, bonds, not sure where to go with this. Can you shed a bit of light on what to do in times like these? I want to make sure I can provide for my retirement in 12 or so years.
Hobson answered: Hi Tim, You are spot on to be concerned about diversification. My recommended allocations by age are:
30s and younger: 100 percent stocks/stock mutual funds
40s: 80 percent stocks/stock mutual funds and 20 percent bonds
50s: 75 percent stocks/stock mutual funds and 25 percent bonds
60s: 70 percent stocks/stock mutual funds and 30 percent bonds
70s and older: 50 percent stocks/stock mutual funds and 50 percent bonds
This is the identical asset allocation I have suggested over the years on "Good Morning America," and I do not believe the allocation should shift because of recent market volatility. While I am biased toward stock investments, I have always counseled diversification across different types of stocks, which helps to mitigate risk. To that end, make sure you are not overweighted in company stock and that your equity diversification is comprised of a variety of mutual funds instead of individual securities.
Kristine, from Columbia, Mo., asked: I am 23 years old and am ready to begin a Roth IRA account but I find myself apprehensive due to the fall in stocks. Is now a good time to start a retirement fund?
Hobson answered: Hello Kristine, now is actually a great time for you to open up a Roth IRA. At 23, time is on your side and you are at a great age to start saving for your retirement. It is never too early!