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My spouse thinks we should take our money completely out of the market. We’ve lost so much already. We’d like to have something left for retirement. Help!


Have you really lost so much, or does it just feel that way? Uncertainty over developments in Europe and here at home, especially in Washington, has left investors feeling nervous, but stocks have been holding their own. As 2011 was drawing to a close, the market was little changed on the year, even after the big summer swoon, and it was up about 80 percent from the 2009 low. The only way you could be significantly out of pocket is if you had the misfortune to buy at the absolute top in 2007 or if you picked some really lousy stocks or mutual funds.
If you sell your stocks, what do you intend to buy instead? Yields on government bonds and bank deposits are downright miserly, the lowest they’ve been in about 60 years. Stocks, by contrast, are trading at well below their long-term average valuation, in part because the ups and downs have made owning them uncomfortable. But while short-term swings can provoke anxiety, they shouldn’t matter to investors saving for a retirement that is many years away.
If you’ve lost money because the stocks or funds that you own are underperforming, then that’s a different story. You have good reason to cut them loose and rebuild your portfolio. In the interest of diversification, a portion of your holdings should be in a mix of government, high-grade corporate and high-yield bond funds. The older you are, the more you should have in bonds, too. But financial planners will tell you that to have the sort of growth that you’ll need to pay for a comfortable retirement, assuming it’s fairly far in the future, you should maintain a healthy allocation to stocks. A mélange of funds holding foreign and domestic stocks of large and small companies should do the trick.
-Conrad de Aenlle