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Old 10-27-2008, 05:44 PM   #21
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You cannot let current market performance change the risk tolerance you have. If you were willing to be in on the way up, you need to have the same willingness to be in on the way down.

Market performance does not change a person's tolerance for risk. If you are not liking the ride down (I have lost 40% thus far in 2008) then you need to redefine your whole financial plan, risk tolerance, and asset allocation.

I would venture to suggest you got to this point because you did not have a plan. You took action (saved for retirement) without a plan as to how that money would be invested. Make sure you plan the retirement savings plan all the way through.

The plan should have
1) a tolerance for risk, generally defined as %stocks and % bonds
2) a plan for how much to contribute (based on % of gross pay)
3) a plan for when to shift the allocation (as you get older and/or accumulate more money)
4) asset classes (large cap stocks, small cap stocks, foreign stocks, bonds, etc..) which take on the risk defined in #1.

As the value of #4 changes due to market and contributions, look at #2 and #3 for when to change the account values.

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Old 10-27-2008, 05:45 PM   #22
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The massive redemption of mutual funds in Sept convinced me of that. Actually almost every day we see huge selling at the end of the day, which I've heard is because people call up the mutual fund companies to redeem shares and the last moment.

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Old 10-27-2008, 06:38 PM   #23
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Originally Posted by clifp View Post
Actually almost every day we see huge selling at the end of the day...
I figured it was because the Asian markets were opening during the final hour or so of the American markets.

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Old 10-27-2008, 07:26 PM   #24
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It's hard to tell what will turn out to be a good thread. I believe this one is a good response to the down mood (varying from strong uneasiness to panic) of most rational investors at this time. I appreciate it very much.

Thanks ZMAN for starting the thread. Thanks to the others for you compassionate and inciteful responses. I plan on sending this link to others that need to be "talked down".


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