StarTribune.com
farrell101208
SearchSearch: Manage your Star Tribune subscription Manage subscription  |  Vacation stop

On the homepage

Sunday's paper

HCMC bleeding with deep cuts

Out There

Reusse/Souhan

Reusse vs. Souhan: Unsportsmanlike Comment

Schools

St. Paul schools chief: 'I can't do it alone'

Home | Business

Continued: With time on your side, stick with stocks

Chris Farrell: Your Money
E-mail this storyE-mail this story
Save to del.icio.usSave to del.icio.us
Share on FacebookShare on Facebook
Share on DiggShare on Digg

Minnesota business by the numbers

See Minnesota's top earning companies, CEOs and non-profits

More from Chris Farrell

Q I'm taking a new job and I'm trying to figure out what to do with the profit-sharing I've earned with my employer. Should I look into opening an IRA to roll it into? Or just take the cash and pay the penalty, considering the state of the market? I'm entering a position financially where I can focus on investing. But is now a good time to get started?

AUTUMN

A I would roll the money over into an IRA. I wouldn't take it out. The reason: You'd lock in your losses, pay ordinary income taxes and a 10 percent penalty on the withdrawn money, and forgo the impact of your money compounding over a long period of time.

These are nerve-racking times for anyone invested in the stock market. We're all confused and nervous. Still, several weeks ago I had a conversation with Michael Mauboussin, chief investment strategist at Legg Mason. He said something that's important: Your time horizon matters. "With a longer time horizon, say 10 to 20 years," he said, "even the crash of 1987 looks like a blip."

He's right. You have time on your side. The key is to create a well-diversified portfolio. Of course, diversification doesn't always work, especially during major market meltdowns when it seems just about everything falls in value at the same time -- with the exception of default-free U.S. Treasuries.

But the effect is temporary, and the benefits of diversification will become apparent once again. "During times like this, don't extrapolate what is happening today to 15 years down the road," said Ross Levin, a certified financial planner and head of Accredited Investors Inc. in Edina.

By the way, if you've learned the hard way that your earlier investment choices saddled you with a too-risky portfolio, figure out where you'd like to make changes. Then I would make those changes over time. For example, I am a big fan of safe harbors for money in a retirement portfolio, like Treasury Inflation Protected Securities.

Chris Farrell is economics editor for American Public Media's "Market- place Money." Send questions to cfarrell@mpr.org, or to kaching@ startribune.com. Put "Your Money" in the subject line.

Previous PagePrevious page

Recent Business stories

Salazar defends Obama record on energy, accuses oil and gas industry of 'untruths' on drilling - October 11, 2008
Salazar defends Obama record on energy, accuses oil and gas industry of 'untruths' on drilling - Interior Secretary Ken Salazar lashed out at the oil and gas industry Tuesday, accusing some industry trade groups of acting like an arm of the Republican Party in criticizing the Obama administration's record on energy production. More

Comment on this story   |   Read all 1 comments   |  Hide reader comments

Subscribe

Blog: Patent Pending

Lights out at U energy conference. Irony police notified.

Just as Lawrence Kazmerski, a top official at the National Renewable Energy Laboratory, was about to give the keynote address at the University of Minnesota's annual E3 conference at the RiverCentre in St. Paul, the lights went out, bathing the audience in darkness and a deep sense of irony.

Recent posts