Retirement Reform Blog

Whether because of his slow, steady pace or the big hard shell on his back, the turtle is a reptile we should all consider emulating during a market downturn.  This economic landslide in particular has caused hysteria among investors looking to build their retirement nest eggs and has prompted many to leave the market all together opting for the cookie jar or the sock under the mattress instead. The prolonged contraction we are facing has many wondering whether or not we’ve even hit the bottom yet.  But take heart! The clouds will soon break.  It’s all in the approach.

A Wall Street Journal article by Bret Arends praises the value of investing through dollar cost averaging during unsteady times.  Dollar cost averaging means investing the same amount of money into your mutual funds or shares every month regardless of the ups or downs of the market. Why is this a good thing? Think of the turtle. He kept his slow and steady pace, never pausing or getting distracted, and he won the race. Similarly, with dollar cost averaging, though the day to day fluctuations of the market may place you ahead or behind the other hares, in the end, you’ll come out on top because you’ll have steadily invested while others have been distracted with golden apples that have been strewn across their paths.  Arends gives some great figures to illustrate this point. And remember there’s no shame in being the turtle (or having a nice chunk of change- maybe for a new shell).

Tags: 401(k), dollar cost averaging, economic downturn, investing, stock market