Do not stop investing. Now is a good time to invest. You don't walk into a store and say, bah, the shirts are half-off, I'll wait until they're full price, do you?

Yup. There's a saying that "fortunes are made in down markets", and that's why.

In theory your allocation assumes that there will be dramatic downturns. They don't matter too much unless you'll be needing the money in the next few years. If you have 30 years before you need to access your retirement money, all this downturn means is that everything's on sale.

If you're losing sleep over this, though, maybe your allocation isn't the best for you and in the long run- maybe not right this minute- you should go more conservative? Traditionally that means you'll have less upside to go with less downside.

All this depends on your account having basically good funds in it. Are they mutual funds? Individual stocks are a lot riskier. A mutual fund will rarely go down to $0, but a stock position in Enron will.

If you have less than about half a million dollars it's my opinion that stocks are too risky unless it's 1) your play money, and/or 2) you don't mind putting the time in to watch them pretty much daily, and at least monthly. And even that's no guarantee, but it helps.

I think I maybe didn't answer your question.

Oh, it's just mutual funds, I have 25 percent in Pax (socially responsible, lots of bonds), and 75 percent in a Vanguard fund that automatically gets more conservative as I approach retirement (which will be at about age 70 or so, I think, as I'm a lawyer, lawyers typically work into their early 70s). It was just under $200,000 before the crash. I come from a family of women who live into their little-old-lady 90s, and I don't own a home, so I put about 15 percent of my income into retirement.

I'm 43, so I keep thinking, "well, I won't need the money for 30 years." But the way people talk, it sounds as though there won't be an economy in 30 years. I'll just try not to listen to them. I'm pretty level-headed usually, just find this situation confusing.

I wish I could offer advice on the actual question, but you can usually tell which thing your Vanguard retirement date is set for. Mine's 2050, I think. My parents' ones are 2010. Of course, the majority of my financial advice comes from reading Mefi and listening to my father yell at me about putting gas in the car.

Don't listen to people, listen to people who know what they're talking about (because plenty of people don't). There's an article in this week's Business Week Personal Businses section called "Why You Shouldn't Panic". Princeton Economic professor Buton Malkiel notes that, "One of the things we know about individual decisions in markets is that people generally do the wrong thing...I know money is coming out now. I don't know whether this is the bottom. But taking money out now, when things look horrible, is almost always the wrong thing to do."

Those are both pretty good, if I remember right. Personally I'd leave them be, but there isn't ever a Right Answer. If I thought the socio economic collapse was imminent pull out all my cash and stock up on whiskey, guns, ammo, and possibly a good cheddar cheese mother, but that's just me.

A cheddar cheese mother?!? Where can I trade my plain mother for one of those???

The internet is a wonderful thing, TPS.

::cries tears of joy::

Isn't the common advice to pay off debt as a top priority and have a few (or 6) months wages in savings next, and then the retirement and investing after that? Of course, if you think we're near the bottom you might get some bargains in stocks. But that'd be too iffy for my blood right now. Not that I know anything much about investing. If you think there'll be no economy in 30 years, then look toward a subsistence lifestyle.

DarkForest, that depends. Yes, that would be ideal, but if you get tax free deductions into your 401k AND it's matched by your employer, (100% return right there!) you'd be foolish to pass it up. And of course emptying out your retirement plans early is throwing almost half of it down the drain, due to taxes and penalties.

Thus people end up with debt, no emergency fund, AND big retirement accounts. It's very common.

You're absolutely right. The employer match thing on retirement contributions is great if you have it. It probably depends also on what kind of debt you have. Still, having at least having some emergency savings is probably a good idea. I'm speaking as a rank amateur, of course. Consult your local finance guru.

For some reason, I keep logging into Fidelity's website to see how far down my 401k has gone down. It's down 27% for the year today. It's not like I'm going take my money out in the next 20 years but I can't stop looking at it. I actually upped my salary contribution, figuring that this is a buying opportunity which is the logical thing to do but emotionally I can't stop worrying about it.

If your time horizon is 30 years, I think it's a mistake to have an allocation that doesn't heavily weight equity (no matter what size your account).

Corporate bonds have agency problems (management is working against you, not with you) and government bonds expose you to inflation. Equity is the primary way to invest in human ingenuity.

I recommend David Swensen's book aimed at individual investors, Unconventional Success. He runs the Yale university endowment. Other than pushing hard for a large allocation to equities, he rails against the fees and agency problems found in the mutual fund industry. Vanguard is one company he recommends (also TIAA-CREF, if you have access to them).

This article details Swensen's recommended allocation and indicates which Vanguard indexes fund match up with the allocations.

Personal financial planning extends far beyond retirement savings. For instance... If you have disability insurance, consider upgrading it. If you don't have it, you should have a very good reason why not. Holding debt is a calculated risk unto itself.

For instance... If you have disability insurance, consider upgrading it.

Most people I know can't purchase individual disability insurance (all of the US disability insurers ding any applicant with mental health anything).

I'd say it's a great time to buy stocks or mutual funds right now, because the market is so low.

The market rebounded even after the Great Depression, and your assets will be worth quite a bit more than they are now in the long run.