Is it me or does it suddenly feel like October all over again? We've had a little respite, but now everything seems headed back down the tubes.
Let's make the rounds. Banking? Citigroup (NYSE:C) is falling to pieces. Bank of America (NYSE:BAC) will need yet another bailout -- and is talking about layouts that could exceed 10% of its workforce. Retail? Ravaged -- from Best Buy (NYSE:BBY) to Borders Group, the last few months have been grim. Tech? Apple's (NASDAQ:AAPL) Steve Jobs is taking a medical leave of absence to fight his still-mysterious illness. Reeling Motorola (NYSE:MOT) announced another 4,000 job cuts.
Not all of the news is bad, of course: Ford (NYSE:F) showed signs of real strength at the North American International Auto Show earlier this week, and JPMorgan Chase (NYSE:JPM) actually made (a little) money in the fourth quarter. But those are awfully faint bright spots in a very dark picture.
For those of us who are just trying to figure out how to recombobulate our retirement savings, it's a particularly dark picture. What can we do?
The bad news, the good news
If your retirement nest egg has taken a big hit in the last few months (and whose hasn't?), I've got bad news and good news. The bad news is that there's no easy fix. But -- and this is the good news -- there are things you can be doing to get the most out of whatever the market gives us in the coming months and years.
That's the key thing to remember: We can't move Mr. Market, we can only maximize our profits from whatever he offers. Of course, Mr. Market is a tough character to work with. Sometimes he's upbeat and prices things high, sometimes he's downcast and willing to sell the good stuff cheap, and sometimes he really needs to get hauled off to the psych ward for a few weeks of Thorazine and basket-weaving.
Put another way, it's like sailing -- you can't control the wind, but you can set yourself up to take maximum advantage of what you've got.
Making the most of it
Here are the biggest things to remember when pondering what to do with your retirement portfolio:
- Keep your cool. During last fall's craziness, I urged retirement investors to remember "Rule No. 1" -- don't panic, because panic leads to bad (read: expensive) decision-making. I think many investors are kind of numb to volatility and big down days at this point, but if we head down to new lows that numbness might give way to new worries. If you feel a rising urge to sell everything and stock up on Chef Boyardee, stop. Take a deep breath and remember to think long-term -- and remember that this too shall pass.
- Hone your asset allocation. Are you following a diversification plan, or are you just investing in whatever looks good this month? Study after study has shown that well-thought-out asset allocation reduces risk and increases returns over the long haul. Your plan provider's website can help you come up with a good plan, or check out Rule Your Retirement's model portfolios for a look at some excellent diversification roadmaps (it's a paid service, but grab a free trial for 30 days of access).
- Keep investing. If we really are near the lows for this bear market, then this is an ideal time to be investing as much as you can afford. (And if not, then you're still dollar-cost-averaging downward.) I know it feels scary -- like you're throwing good money after bad. Just do it -- if you don't, you'll be kicking yourself a few years down the road.
- Stay on top of things. You don't need to spend every morning obsessing over the latest financial horrors, but you do need to keep an eye on larger economic trends and regulatory developments as we move through these difficult times. I've mentioned the Fool's Rule Your Retirement service already, and I think it's the most cost-effective source of expert advice specific to retirement investing out there. They cover all the bases, from investment advice to tax and regulatory changes, in friendly Foolish language. But don't take my word for it, check it out for yourself. A 30-day trial is completely free, with absolutely no obligation. Click now.
