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Every investor is different. While most investors share the same general goals (i.e., securing their futures and building for retirement), their approach to achieving those goals is as varied as the day is long.
One trait many investors currently share, however, is fear. Thanks to the up and down nature of the market, where stocks have risen and dropped dramatically on a daily basis, many people are fearful for their existing investments, and unsure as to how, or if, they should continue making those investments.
Because every investor is different, how individuals approach the market and securing their futures is largely dependent on their age. While Baby Boomers have likely taken a significant blow during the current recession and might want to consider pulling back some investments, the following strategy could be a solid approach for younger investors, who are among the most confused about what to do as the economy continues to struggle.
* Don’t be averse to responsible risk with retirement investments. As rough and tumble as the market has been since late fall 2008, younger investors with less to lose might want to consider taking risks with the market while it’s down. When investment risks pay off the reward is often great. However, this shouldn’t translate to putting all your money on the 100-1 longshot at the racetrack. Taking risks and being an aggressive investor are two different things. Being aggressive entails taking some responsible risks, and not simply risking for the sake of risking.
Fortunately, younger investors are typically the ones who can comfortably take those risks and not end up a nervous wreck. The current market is loaded with risk, but can also yield huge rewards. For younger investors, taking some responsible risks with retirement savings could prove a very prudent move when the market returns to normalcy.
* Be sure to have ample savings. Unemployment has affected every region of the country, and few people are safe from the specter of losing their job. That said, while now can be a good time to invest for younger people, with the potential for high returns if they’re willing to take risks, it’s also of paramount importance that young people save as well. Financial advisors suggest having six months salary in savings as a way to successfully make it through a potential layoff. For young singles, however, more than six months salary might be necessary in the current economy.