Market fluctuations are nothing to fear: In fact, they’re normal. By basing your investment decisions and investment ideas on good information, you can stay with the retirement savings goals and strategy you’ve set. Without worrying about short-term declines. Just apply these time-proven principles. If you do not have time and expertise for market timing in your trades, then these investment rules of thumb should keep you sound and secure.

Step 1: Invest for the long term.

With experience, most investors come to realize that volatility decreases over time. Holding a stock for 20 years reduces its volatility by two-thirds, compared with keeping it in your portfolio for just a year. Of course, volatility isn’t necessarily a bad thing. As the chart on the next page shows, dramatic short-term changes in value can be positive or negative. And historically, time has reduced the risk of holding a diversified stock portfolio. But as a long-term investor, you want to focus on long-term trends and your longterm goals. Thinking this way can help calm the jitters caused by short-term fluctuations.

Step 2: Diversify, diversify, diversify.

One way to protect yourself from market downturns is to own various types of investments, or, diversify your portfolio. By spreading your portfolio across the plan’s three asset classes—stocks, bonds, and short term investments—you can help offset the risk of any single asset class. Keep in mind, however, that diversification doesn’t ensure a profit or guarantee against loss.

Step 3: Match investments to your comfort level.

Here’s that risk-tolerance thing again. As a legendary mutual fund manager once put it, “The key to stock investing isn’t the brain. It’s the stomach.” Even if your time horizon is long enough to warrant an aggressive-growth portfolio, you need to make sure you’re comfortable with the short-term ups and downs you’ll encounter. If watching your plan balance fluctuate is too nerve-wracking for you, think about a portfolio that does feel right.

Step 4: Don’t try to time the market.

Even experts can’t consistently predict the market. Yet many investors think they can guess what will happen, based on hunches or rumors. Pulling out of stocks and bonds in anticipation of a market decline is one form of market-timing behavior. So is holding off on investing until the market settles down. However, unless you know precisely when to buy or sell—and very few investors do—you can, and probably will, miss the market. That can really cost you. Most of the market’s gains occur in just a few strong, but unpredictable, trading days here and there. To benefit from the market’s long-term performance, you need to be in the market on those days. Which means you have to invest for the long run.

Step 5: Do well 'on average.'

As a retirement savings plan participant, you invest regularly over months, years, and decades. This is consistent with a time-proven investment technique called dollar cost averaging. Each pay period, you put a set amount in each of your plan investments, regardless of how the market’s doing. Over the years, your money buys more units of each investment option when prices are low, and fewer when the prices are high. In the end, you get an averaged return that could be higher than if you invested all your money at once. (See the table to the right.) More importantly, you avoid the temptation of trying to time the market.

Step 6: Know your strategy.

To feel comfortable about investing, you need a strategy. Finding yours is easier than it might sound. Your investment strategy is a function of several factors, including:

• Your time horizon
• Your goals
• Your tolerance for risk

Now, the first factor is simple. Just count the years left until you plan to retire. Your primary goal is to accumulate enough savings to create the income you need in retirement. And your risk tolerance reflects your broader financial situation—your savings, your income, your debt—and how you feel about it all. Looking at the whole picture will help you determine if your strategy should be aggressive, conservative, or somewhere in between.

Apply planning, patience, and focus.

Remember that investing is a long-term process, requiring a steady, long-term approach. You can do it. tradingStocks.net is committed to providing the information, tools, and support you need. For those energetic souls who like to day trade tradingstocks.net also provides technical analysis tools with real time stock market data feed.