Having just been brutalized by the stock market, you may be wondering whether or not you should stop throwing good money after bad by contributing to your 401(k). It may go against your gut, but now is exactly the wrong time to stop putting money into the stock market. Don't believe me? Ask yourself the following question:

When you're a net buyer, do you prefer to pay more or less?
That's not a trick question. Allow me to hand over to Warren Buffett, who'll explain how it is relevant -- as he did in his 1997 shareholder letter:

"If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? ... Even though [investors] are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. ... Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."

In other words, if you halt your contributions now, only to resume them when the market has stabilized, you're effectively saying that you are only comfortable paying higher prices for stocks and that you would never want to take advantage of lower prices. Does that sound like the smart course of action?

Looking for a bottom?
"Ah," you counter, "But I don't want to resume contributions when stocks are higher, but rather once they've bottomed." Unfortunately, it's a pretty good bet that you don't have any particular skill in timing market bottoms -- that's unlikely to prove to be a winning strategy. You're better off relying on regular contributions that take advantage of today's lower stock prices. Take a look at the following table:

Stock

Current Stock Price (10/10/2008)

Stock Price 2 Months Ago (08/08/2008)

Loss

Pfizer (NYSE:PFE)

$15.14

$19.84

(24%)

Visa (NYSE:V)

$52.00

$72.50

(28%)

Starbucks (NYSE:SBUX)

$11.08

$15.12

(27%)

Microsoft (NYSE:MSFT)

$21.50

$28.02

(23%)

ExxonMobil (NYSE:XOM)

$62.36

$78.32

(20%)

Hewlett-Packard (NYSE:HPQ)

$37.00

$45.74

(19%)

Petrobras (NYSE:PBR)

$26.10

$51.06

(49%)

Is the world the same as it was two months ago? No. Does the deterioration in the credit crisis merit a downward revision in stock prices? Assuming they were fairly priced initially, yes. Does it warrant lopping off a fifth, a quarter, or in the case of Petrobras, half of the market value? I certainly don't think so.

I'm not specifically recommending the purchase of these stocks, but I think there is strong evidence that many stocks are now trading at fire sale prices and are, in fact, compelling bargains. Continuing to make contributions to your 401(k) will allow you to get in on them.

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Alex Dumortier, CFA has a beneficial interest in Microsoft, but not in any of the other companies mentioned in this article. Pfizer and Petroleo Brasileiro are Motley Fool Income Investor recommendations. Starbucks, Pfizer, and Microsoft are Motley Fool Inside Value recommendations. Starbucks is a Motley Fool Stock Advisor selection. The Fool owns shares of Starbucks and Pfizer. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.