How to handle the crisis in your 401K

By Megan McArdle

Don't look.  Seriously, don't look.  I have no idea what's going on with any of my equity investments, because that is not short term money that I need to keep my eye on.

If you look you will get upset, and you will be tempted to do something stupid.  I can't guarantee that the market won't drop further and you won't regret having held on.  But as a general rule, selling into a massive liquidity crisis is a pretty bad idea.  Selling in a panic because your assets just dropped 30% is almost certainly a bad idea.

The good news is that while the stock market can take a long time to recover, it historically doesn't actually go down for more than a couple of years. 

Yeah, that's not very good news.  But unless you're planning to retire right now, my advice remains the same:  don't look.

This article available online at:

http://www.theatlantic.com/business/archive/2008/10/how-to-handle-the-crisis-in-your-401k/4219/