Financial Literacy - Retirement income planning
investing
Did you sell stocks in the market crash?

Last fall and spring, investors were likely gripped by fear as they watched the stock market implode. Did fear prompt a change in your investment strategy?

In Bankrate's new poll, American workers were asked how they changed their retirement investment strategy as a result of the financial crisis.

The majority (53 percent) said they kept investments about the same. Whether this was a deliberate decision or not, we can't say for sure. But oftentimes we are paralyzed, whether by shock, indecision or just plain inertia.

Some people took action. Fourteen percent of Americans suddenly discovered their aversion to risk, with 9 percent putting more money into fixed-income investments and 5 percent selling off most of their stocks or stock funds. Only 3 percent had the nerve to buy more equities during the fire sale.

Maybe these few brave souls were persuaded by Warren Buffett's advice to "be fearful when others are greedy, and be greedy when others are fearful."

We asked Bankrate's readers if the market decline impacted their investment strategy. Did they sell stocks or funds? Or did they buy more? Below, they share their stories.

Disgusted with Wall Street

During the financial meltdown of 2008, I held steady leaving my current investments ride in 401(k) and IRA accounts where they were, but changed some of the future contributions to more stable value funds. We also held off major purchases like renovations and we have always lived within our means, so we had an eight-month emergency fund in the bank. We also had another eight months of emergency funds still invested in U.S. savings bonds. The older bonds are still paying pretty well.

I belong to an investment club, so have studied stocks for a number of years, but now I am paying a lot more attention to exactly what bond funds my 401(k) invests in -- not just the rating of the bond fund.

Once the markets come back up more, I will move more funds to accounts that did not fall as far or fast in the IRA and 401(k) accounts.

I also have a new disgust for Wall Street. I have invested more consciously. Since I have been an environmentalist for a number of years, I invested some money in the Winslow Green Solutions Fund. The fund seeks out companies that are trying to address better approaches to the environment, as well as the economy, in both the U.S. and abroad. They are also companies that you can feel good about, like Whole Foods or solar panel companies.

I plan on taking over more of my financial accounts from my financial planner soon. I have come to regard most financial planners as no more than salesmen/women who are looking out for their commissions more than my retirement. Like one of our senior fellow investment club members said, "If I'm going to flush money down the toliet, I would rather pull the handle myself."
Betty Peck
Charlotte, N.C.

Finding shelter in tax-free munis

Timing was on my side. Just before all the banks started having financial woes, they were offering quite attractive rates and I took advantage of CDs. Of course, over a year's time, when it came time to renew, the rates had dropped into the cellar, but so had the stock market. I took the maturing CDs and opened a new brokerage account, investing only in closed-end, triple-tax-free muni funds while they were at their lows. In just a short time the account has gained 25 percent in value, but the beautiful part of it all is the monthly tax-free dividend income.
ALR
Staten Island, N.Y.

Staying nimble in the market

If the market change did not change your investment strategy, you are asleep at the investment world. Things change and they change in the financial world, too. If you stick to the old principles and do not pay attention to the world, you may suffer the consequences. I changed my approach. I looked at what companies' (prospects) were looking forward and which investments are likely to work well in the environment. I'm not investing with quite as long a model any more. Times change -- adapt.
Richard Bernhardt
Cupertino, Calif.

Maintaining equanimity

I have 30-plus years until I retire, so I have plenty of time to bounce back. My portfolio lost approximately 40 percent, but I am recovering quite nicely now. My portfolio has always been aggressive, with an approximately 85 percent stock/15 percent stable value mix.

I set my retirement savings on autopilot a few years ago. My 401(k) automatically rebalances annually and my savings rate automatically increases by 1 percent annually. When the market recently melted, I did not change a thing. I kept reading how people react to the market with their emotions, and I was determined not to do that. I reviewed my quarterly statements and was well aware of my losses, but I did not let my emotions sway me to decrease my savings. If I had had extra money to invest, I would have bought MORE while everyone was selling. The stock market was having a clearance sale and I believe that I will fare well from buying while stocks were cheap, as long as I make sure that I am well diversified and that I carry a reasonable amount of stocks based on my years to retirement.
Nancy Hernandez
Chicago

Buying at bargain rates

We have trimmed our construction business and our personal costs as much as possible. We keep driving our paid-off vehicles. We leave our personal cash reserves alone. The only interest payments we ever make are for our mortgage and/or vehicles. We have stayed the course with our IRA account, figuring we were buying at bargain rates anyway so that when things do turn around, we should be happy with our decision. We don't go out as much and now get together more at home with our family and friends -- which has been a bonus.
CDS
Longwood, Fla.

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