So many people are being affected by the downturn in the stock market. Unlike the Great Depression crash which mostly affected the upper crust of our society, this crash is much further reaching into our society due to the amount of retirement savings invested in the stock market. This story in today's LA Times talks about how the 2nd bear market in 8 years has "many people rethinking their once rock-solid allegiance to stocks."
Giving up on the stock market is an overreaction fueled by panic and the wrong thing to do. The stock market is still a legitimate, long-term way to invest your retirement savings when done insightfully. And right now a ton of buying opportunities exist. But the market is a cyclical beast and downturns are unfortunately bound to happen.
A more appropriate reaction from investors should instead be a greater understanding that the current model of blindly dumping money exclusively into mutual funds is broken. There is an overwhelming lack of diversification in most people's retirement portfolios. If more had balanced their portfolio with investments in other asset classes such as real estate, bonds and commodities, the hit to their retirement account wouldn't have been as drastic. If you're not already, let this current downturn be your wake-up call and better diversify your retirement savings NOW for the next downturn.
I'd like to hear how has the last year affected your retirement strategy and whether or not your portfolio is truly balanced.
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