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4 steps to cut investment risk

By Jennie L. Phipps ·
Sunday, May 27, 2012
Posted: 6 am ET

The 2008 stock market crash is fresh in the minds of many Americans of every age who are saving for retirement.

A recent survey by investment firm Charles Schwab found that 35 percent of Americans consider protecting retirement assets more important than growing those assets, while only 8 percent consider growing retirement assets more important than protecting them.

You could argue that these kinds of attitudes are risky retirement planning because failure to take some risk increases the possibility that you won't have enough to live on when you finally retire. But it is certainly understandable that many people would rather be safe than sorry.

Whatever your attitude toward risk, there are some solid steps to mitigate it that every smart investor should take:

  1. Make a plan and stick to it. Unless you are experienced at this, getting some investment advice is worth the cost.
  2. Choose a mix of investments. Putting all your eggs in one basket -- like your employer's stock purchase plan -- guarantees you'll see a big loss if that investment goes south.
  3. Check on your portfolio at least once a year and more frequently if the sledding has been rough. Rebalancing your investments so they reflect your plan is important. Otherwise, why have a plan?
  4. Keep saving and investing. After the 2008 meltdown, some people pulled their money out  and put it in something they saw as very safe -- like the mattress. The problem was that when the market came back, they didn't get the rebound, and most of them will never catch up.
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