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Question:


I’ve seen my nest egg shrink significantly in the past 3 years. I’m ready to call it quits with the stock market, but that’s irrational, especially with my retirement nearing. Any tips on how to bounce back (besides "ride it out") would be appreciated.
-NearingRetirement


Answer:


The stock market dropped out of sight between the summer of 2007 and early 2009. Since then it has made a substantial recovery. Over the last three years the average domestic stock fund in Morningstar Inc.’s database has lost 1.6 percent a year – worth more of a shrug than a scream. The average balanced fund, which is typically kept 60 percent in stocks and 40 percent in bonds, shows an annualized loss over the same period of an even more shrug-inducing 0.07 percent. Keep in mind, too, that before stocks tanked in 2007 they had experienced a stout, multiyear rally.
 
After nearly doubling in less than two years, the stock market may be due for a correction, perhaps a big one, so if you do want to swear off stocks, this seems like an opportune time. A better course of action might be to concentrate on multinational blue chips with high dividend yields. They are financially strong, comparatively cheap and the regular income from their dividends, often more than bonds pay, is good for the nerves. 
-Conrad de Aenlle



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