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?


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 The reason: You'd lock in your losses, pay ordinary income taxes and a 10 percent penalty on the withdrawn money, and forgo the impact of your money compounding over a long period of time.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.