How to Survive the Roller Coaster Economy
By Dave Ramsey
I know that the recent media coverage about the economy scares investors. The smartest thing you can do right now is hold on to your investments. Do not cash them out.
That's what I'm doing. I have a lot of money invested in the American economy through growth stock mutual funds. But you know what? I'm not touching those funds. I'm riding this market roller coaster to the very end.
Well, people who make money in the stock market are the ones who think long-term and don't jump in and out based on the market fluctuations. Market timing is trying to predict when to add or withdraw your money in the market; historically, it doesn't work. After all, the only way to get hurt on a roller coaster is to jump off!
However, staying invested ensures that my investments won't miss those best-performing days. And guess what: if you missed just 10 of the stock market's best-performing days over the past 20 years, you would have lost tens of thousands of dollars!
I honestly believe that 10 years from today, you'll look like a genius if you hold on to your current mutual funds!
But Dave, I'm almost old enough to retire. Should I cash out?
Nope. I understand you're scared, but think this through. If you're under 59 and a half years old and cash out your 401(k), you're going to face penalties and pay Uncle Sam a lot of tax!
When it's all said and done, you'll take a bigger hit on your money by cashing out than any drop in the stock market cause. So, even if you want to retire, you're better off leaving your 401(k) or IRA alone.
Keep thinking long term. That's what I'm doing. I'm not cashing out. I believe the market and my mutual funds will be okay.
And 10 years from now, it will have been a great decision.