Seasick savers enduring stock market waves are ready to jump ship.
But if your retirement is decades away, a stormy and somewhat unpredictable market is still your best bet. Gow-Cheng Huang, Ph.D., a professor of finance at Alabama State University, offers this investing advice for savers trying to stay afloat.
Question: With the current economic situation, how safe are individual retirement accounts?
Answer: It depends on what the IRA funds are invested in. If the IRA funds are invested in money market instruments such as U.S. Treasuries or bank CDs, the IRAs are safe. On the other hand, due to the current economic instability globally and domestically that causes so many fluctuations in the stock market, IRA funds invested in stocks or stock mutual funds are riskier.
Question: Are there any best practices to adhere to when investing in an IRA?
Answer: It depends on time horizon and risk tolerance. If your IRA investment is for long-term goals and you can tolerate risk, an IRA account is better off with stocks or stock mutual funds. When investing for the long run, the best practice is to use the dollar-cost averaging technique by allocating a fixed amount of money to buy a particular stock or stock mutual fund on a regular schedule. The dollar-cost average enables you to buy more shares when prices are low and fewer shares when prices are higher.
