AboutWarren Boroson Expertise Author of "Keys to Investing in Mutual Funds" (Barrons), "Ultimate Mutual Fund Guide" (Probus), "How to Pick Stocks Like Warren Buffett" (JKLasser), and "The Reverse Mortgage Advantage" (McGraw-Hill). Former financial columnist for Gannett News Service.
Experience Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD) about mutual funds and a newsletter, FundDigest.
Question I'm just wondering, in general, when the markets don't perform so well isn't it good for someone who has 20 years or so until retirement? Unless the particular company stocks held by a mutual fund had an Enron type situation, wouldn't prices be cheaper and allow 401k contributions to buy more shares?
like Enron
Answer Dear Glenn:
Yes, in general it's good when stock prices retreat--so you can scoop up bargains. (Assuming you won't need money soon & have to sell.)
But...
beware.
* Don't invest a lot all at once. The market may have a LOT more to drop.
* The market may stay down for a long, LONG time. Like years. And years.
* Make sure you have plenty of cash. To tide you over if the market stays down for a long, long time. During which time you might have a great need for money--if, for example, you lose your job.
* If you invest, make sure you invest in a diversity of stocks. In case there's another Enron lurking out there. (Which there pretty surely is.)
* Make sure that you already own a diversified portfolio (having a variety of bonds, eg).
So,,,if you have plenty of cash as a cushion...if you won't panic if the stock market goes down much more...if you dollar-cost-average (invest regularly)...and if you invest in a variety of sound stocks...and if your portfolio is well diversified...
