Ask me your investing questions: Market anxiety
Unfortunately, they also demonstrate a fundamental misunderstanding of basic investing principles.
Q. Should I get out of the S&P 500? I am a 75-year-old widow, and I have lost $70 million over the past 12 months.
A. Contrary to popular belief, the S&P 500 is not representative of the U.S. domestic stock market and it is not a conservative portfolio.
At any age, the key to investment success is the determination of your asset allocation and then investing in an appropriate globally diversified portfolio of low cost stock and bond funds. Start by taking the asset allocation questionnaire here.
Educate yourself about investing. A good place to start is John Bogle's book, The Little Book of Common Sense Investing and my book, The Smartest Investment Book You'll Ever Read.
Q. I am 8 years from retirement and currently still have 70% in the stock market. In light of today's economic upheaval, and the likely tenuous foreseeable future, how would you position assets? What percentage should go where?
A. Smart Investing does not change with market conditions. You still have plenty of time until retirement. While it may seem like there is no light at the end of the tunnel, history tells us that markets are very resilient and eventually recover. I would not deviate from good investing practice, which I describe in response to the first question in this column.
Q. How safe is a TIAA traditional SRA (supplemental retirement annuity)? Since Herb Allison took over the organization in 2002, customer service has devolved into chaos and doesn't seem to have significantly improved since his departure. Investment policy may be a different matter, but given Allison's previous Merrill Lynch experience, I'm nervous. I'm 79 and have about half my savings in TIAA. Too much?
A. TIAA-CREF has the highest ratings from all four major rating agencies. I would not be concerned about its financial stability. However, if having half your savings in one institution makes you nervous, there would be no harm in moving some of them to another major institution. You could consider well-known firms like Vanguard, Fidelity, T. Rowe Price or Charles Schwab.
Dan Solin is the author of The Smartest Investment Book You'll Ever Read and The Smartest 401(k) Book You'll Ever Read. His new book, The Smartest Retirement Book You'll Ever Read, will be published in the fall, 2009. Visit his website at Smartestinvestmentbook.com.