Why Stocks, When They Might Fall?

Q Why should I stay invested in stocks if they will all go down with the market whenever it crashes? — M. B., Baton Rouge, Louisiana

A You’re right to expect a big market drop ( or “correction”) one day, as those happen every few years, on average. You needn’t exit stocks, though, unless you will need that money within the next five or 10 years. Successful investors know the value of individual stocks as well as the overall market will fluctuate over time, sometimes sharply. If you buy into healthy stocks at undervalued prices, eventually they should approach or exceed their intrinsic value. But that can take time, requiring patience. Sell any stocks in which you have little faith, but think twice about exiting in anticipation of a drop, as no one knows what the market will do in the short term. You don’t want to be sitting on the sidelines for months or years, missing out on gains.

Q Is now a good time to start contributing to a 401( k) account?— T. S., Las Cruces, New Mexico

A It’s almost always a good time. When it comes to retirement, most of us should be regularly saving and investing, with little regard for the state of the economy. Sock away at least enough to grab all available matching funds from your employer. Consider saving and investing aggressively, too — as much as 10 percent or even 20 percent or more of each paycheck — in order to have a sufficient war chest for a long retirement or perhaps in order to be able to retire early. Retirement can last a long time: If you retire at 65 and live to 95, that’s a 30- year retirement. Want more information about stocks? Send us an email to foolnews@ fool. com.