, Newburyport, MA


February 7, 2012

Where did your investments spend the last three years?


"It is common for investors to respond to a severe market downturn by seeking to protect their remaining assets, often by moving them into instruments they view as extremely safe and conservative. While this reaction is understandable, it can have a very negative impact on an investor's future" retirement income.

The study found that by switching to all-cash portfolios, investors "have very little chance of reaching their retirement-income goals." The cost of panic may be unrecoverable. "Panicking will substantially exacerbate the negative effects" of a market downturn, "making a bad situation even worse. In fact, in some cases the extra years of work required" from going to cash are greater than those due to the market drop itself.

The implications of the findings of the actuarial study apply to panicking or going to cash following any precipitous drop in the market, not just the 2008 drop. The combined discipline of continued regular savings and portfolio diversification is key to reaching financial goals. Those nearing retirement can also add to their retirement income by working a little longer and saving even a little bit more in these times.

• • •

Donald E. Askey, a Certified Financial Planner professional and president of Provident Advisory Group, is a registered fee-only adviser, headquartered in Newburyport. For questions, visit

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