Why you should ignore your 401(k) statement

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Have you looked at your 401(k) statement lately? Don’t!! New numbers from Fidelity Investments show that the average person’s 401(k) balance dropped 12% over the last 90 days. But if you micromanage your account based on the recent bad news, you’ll get the wrong idea and probably do the wrong thing.

The younger you are, you have to remember that your 401(k) is a work in progress with a gestation period of decades. When you are an investor, things go up and down in waves. If you go back to when the stock market hit a low in 2009, some people sold everything and moved all their assets to “safe” stuff like cash or stable-value funds.

Then after the market bottomed out, they were spectators watching a massive market recovery. Sure, now that same market has been not so hot, but the point is, making a short-term emotional zig or zag versus sticking with a well-thought out and diversified plan, you end up missing the most important gains that will happen.

If you are putting your retirement money in a target-retirement fund that automatically gets more conservative as you age, you ride the ups and downs knowing that when the market does recover, you recover with it.

If you believe in the creativity of capitalism, and that over time society becomes wealthier because of it, then you want to be part of that by having ownership in the enterprises that those creative energies ultimately represent. That’s why you stay in the game through thick and thin.

Don’t let short term reversals keep you from your long-term goal, which is financial security for you and your family.

Editor’s note: This segment originally aired Dec. 12, 2011



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