Saturday, May 29, 2010

Younger workers should still buy stocks for their 401(k)'s and use dollar cost averaging

Here’s a good article from “Main Street” by Brian O’Connell, “Should You Adjust Your 401(k) Now?” The link is here.

The short answer is maybe not. Stocks are very elastic, as in 2009 they bounced back more than 50% from the 2008 crash. Furthermore, if you continue to buy, you get shares at lower prices with dollar cost averaging.

Some retirees today are relatively well off if they bought a lot of energy and/or a lot of utility stocks when young and held onto them. Of course, both are more fragile now, given the uncertainties as to how the green revolution will affect them by localizing production and demand.

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