With the dramatic downturn in the stock market in 2008 and the continued uncertainties that prevail in 2009, many are fearful of what lies ahead, especially as it relates to their hopes for a safe and secure retirement.
So what can you do? First off, do not ignore the problem as that will not help your situation. All too often I hear from people that say "I don’t even look at my 401(k) or IRA statements...it's too depressing." Well, the reality is you need to always diligently monitor your investments to ensure you are on the right track. Even the pros lose money, especially in bear markets like we have had over the past 12 months or so.
Second, make sure you understand the investments you own and the amount of risk involved. Said another way, make sure the amounts allocated to equities, bonds and other asset classes (real estate) is proper for your age and risk tolerance. This process, asset allocation, is one of the most important but most overlooked investment principles.
A great example of asset allocation is my 71 year-old mother-in-law who was 100% invested in the stock market as of November 2007. Having just lost her husband (who managed their investments) while she watched their investments incur a serious decline, she was at a loss as to what to do. Thankfully, she reallocated her monies into bonds and has largely withstood the 2008 decline. A simple but effective rule of thumb is to subtract your age from 100 and this is the percentage of assets you should allocate to equities. In the case of my mother-in-law, this would suggest she should have 30% in equities...not 100%!
Third, be honest with yourself as to your knowledge of investments and the amount of time you have to oversee your investments. If you want to do it yourself, you must commit to acquire and maintain a solid understanding of investments. If you neither have the interest or the time, I would strongly encourage you to seek the services of a qualified financial advisor. While there are many advisors out there, be relentless in your pursuit of one that can help you meet your financial goals. This requires a little time and know-how, but your retirement depends on it.

Tom Dickson
Registered Investment Advisor
(412) 441-1272