The Dow Jones Industrial Average is down, therefore my investment accounts must be down. The sky is falling!

Five Misconceptions About Retirement

January 23, 2008

Myth: The Dow Jones Industrial Average is down, therefore my investment accounts must be down.  The sky is falling!

Reality:  While indices such as the Dow Jones Industrial Average and the S&P 500 serve as good barometers of the broad domestic stock market, it is important to keep perspective on what they represent.  The Dow Jones is made up of 30 of the largest U.S. companies.  Unless you own the exact components of these indices, it is likely that your own investment performance will differ from what you may hear on the radio or television, especially if you have a properly diversified portfolio which holds stocks and non-equity investments, such as bonds, real estate and commodities.

When saving and investing for long-term goals such as retirement, it is important to be disciplined about weathering short-term market volatility.  Maintain a diversified asset allocation and rebalance your portfolio periodically.  Remember that until you need to use these assets, no loss has been realized.

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