Today in our weekly “Ask the Old Guy” segment, we’re asking my dad about something that’s probably been on your minds as much as it’s been on mine.

Toshihiko K., a recent Dickinson College graduate asks:

Dear Old Guy:
With the current state of the stock market, my retirement fund (a Roth IRA) is really doing poorly! I am wondering if it’s a good idea to keep funneling money into it, when it seems like all it does is lose money. So, should I keep investing every month like I always do or should I stop until the market gets better again?

Thanks for your help,
Toshihiko K.

Well, if he asked me, I would tell Toshihiko to keep contributing because it’s a long term investment, but let’s see what the much more seasoned investor had to say.

Dear Toshihiko:

Your question is a frequent one these days.

First a word of caution: No one can be sure of the future, but, there’s an old rule of thumb in the timing of investment decisions that states “when people are anxious get greedy, when people are greedy get anxious.” I think Warren Buffett said that. Anyway, there are several factors to consider.

You are talking about retirement investments, and since I’m assuming you’re not an “old guy” like me, you won’t be tapping into this money for around forty years. In other words you have a very long time to recover from losses. When working with that time frame, the most important thing is to keep up the discipline of systematic investments. Although your old investments are worth less today than when you bought them, what you buy today will lower your average cost. It’s hardest to buy when fear is everywhere, but, that, my friend, is when the money is made.

Also, remember that you should always stay well diversified. When you are building your retirement investment portfolio, it’s always wise to have investments in well diversified stock mutual funds and in a fixed income fund. There are many good ones out there and many services, like Morningstar for example, which rate their performance.

Keep it Smart,

Jim

The Young Money Talks “Old Guy”

You know what my dad and I think, but what do you think Toshihiko should do?