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No need to wonder where your cash went: Just make best of it

Updated: May 3, 2013 12:14PM

Where did all the money go? That's the plaintive cry as investors check the balances in their 40l(k) plans or IRAs.

Strangely, they never asked how the money landed in their account as stocks moved higher. That was taken for granted!

Well, don't look around now to find out who has "your" money. It disappeared as magically as it arrived. It's gone to "money heaven!"

We've turned ordinary Americans into portfolio managers of their own retirement plans, without the knowledge, perspective, or self-discipline to make wise decisions.

It shouldn't come as a surprise that as prospects for the economy dim, fewer people want to own the businesses that those stocks represent. When investors rush to sell, prices go down -- and the money represented by those stock prices simply disappears.

Now it's not just the financial stocks, or the "risky" stocks that have fallen 20 percent or more. Now, even the "good" stocks, the ones you'd planned to hold forever, are showing huge losses, caused by "panic selling."

And for a while the sellers will congratulate themselves. They "only" lost 30 percent, and now they can't lose more. But they can't make more either -- unless they're better at picking bottoms than tops!

In the 20 years between 1980 and 2000, arguably the best two decades of the past century for the stock market, if you missed out on just the best 15 out of those 240 months, your total return was just slightly higher than a money market fund!

That's the argument for younger investors to keep on investing the same monthly amount in your retirement plan. Your regular $300 monthly investment will now buy many more shares -- putting you in better shape to profit when the market does rally.

Of course, as you near retirement, you won't have years ahead of you to keep contributing. Watching the money melt away can be painful -- which is why we've talked about having some "chicken money" on the side, so you won't panic in market declines.

Didn't follow that advice? Now all you can do is ask yourself whether you'll feel worse if you don't sell and the market drops more, or if you do -- and the market rallies. When everyone answers that question by selling, we'll be at the bottom!

Don't kick yourself for not selling earlier. And don't kick yourself later for missing the rebound. You're along for the entire ride. America's economy will grow again, and so will your stocks.

And that's The Savage Truth!

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