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Mon October 13, 2008
Ditching stock market now may be bad idea
By Peter O'Dowd
Laramie, Wyo. – The Dow Jones Industrial Average soared upward by more than 900 points today. But this has been a difficult month on Wall Street. You may be tempted to avoid the potholes, but the UniWyo Federal Credit Union's Shannon Markle says converting your investments to cash will devalue your money over time.
That's because money in a traditional savings account cannot grow fast enough to keep up with inflation.
Once you take that on, there is nothing you can do to earn it back," Markle says. "If you throw it into cash for 10 years, you don't realize you're short of money due to inflation until it's too late."
So Markle has this advice for someone who is one or two years away from retirement.
"That person should focus on building their cash reserves and I would not advocate pulling out of the market."
Markle says everyone's situation is unique; but those five years or more away from retirement should sit tight and wait for the market to correct itself.
He adds that people in their 20s should think long-term and consider putting some money into the market every month. He says they should not take money out.
"They need to stay put," he says. "Ideally if they had additional money over the next 12-24 months they would begin to invest that incrementally through this down market, because this is truly where you will get the biggest return for your investment is when we are in down markets."
Markle says young people might also consider paying down credit card debt or car loans if they feel like investing in the stock market is too risky right now.