These are scary times for anyone trying to build or preserve their retirement accounts. Today's roller coaster ride of economic ups and downs -- with swings in the Dow Jones average of 500 points or more in just a few days -- is enough to churn stomachs in all but the most steely nerved passengers.
Is this simply another predictable, even healthy, correction in a long-term bull market? Or are we poised for an investor meltdown?
Stick with fundamentals
Most financial professionals believe the current slump is a predictable -- and even healthy -- correction in the long-term bull market. Other forecasters are far more gloomy. Either way, it's critical to avoid these potentially deadly mistakes.
No one knows for sure, of course. Even a modern-day Nostradamus couldn't tell us what's going to happen tomorrow. But no matter what, avoiding these six costly investment mistakes will help you to keep your head above today's troubled waters.
Mistake No. 1: Panicking over market fluctuations
"Fluctuations in the market are a natural part of our economic cycle," says Stacy Francis, Certified Financial Planner and founder of Francis Financial in New York. " When the market is in a downturn it may seem logical to cash out and go home, but before you do that you may want to think about your long-term goals for that money."
Market downturns, even recessions, are relatively common occurrences in a free economy. A recession is defined as a decline in Gross Domestic Product, or GDP, for at least two consecutive quarters, making it rather easy for us to slip into one. But they have become shorter duration and less severe than they were in the past.
According to studies by Ned Davis Research, since World War II, the average expansion in our economy has lasted 57 months, while the average recession has lasted 10 months. In the past 20 years, according to the study, we haven't had a recession last longer than eight months.