Q: I've been a saver my entire career, always putting away money for my retirement goals. In April 2007 I invested 100 percent of my life savings—401(k) rollovers, an inheritance from my mom, and the hoard of cash that I've been compounding interest on for years—into the stock market. It was the biggest mistake of my life: I've lost half of my savings. Daily I say to myself, "Take it out!" Others say, "Leave it in!" I've kissed my dreams of an early retirement goodbye unless, by some miracle, the stocks bounce back soon. Should I bail out now and take the huge loss? If I stay I fear it will completely evaporate. Or should I go for broke, take out what's left, head to Vegas, and bet it all on black? That's pretty extreme coming from a conservative saver, but seriously, I don't want to wait 30 years to get my money back—I'll be dead by then! Can you tell me what to do?

A: Do not, I repeat, do not book a flight to Vegas. Now, let's get serious about your situation. You didn't tell me your age, but it sounds like you might be around 50. If that's the case, then you should never have invested 100 percent of your money in stocks to begin with. As I explained in last month's column, you want to own a mix of stocks and bonds—stocks because of their long-term potential to earn inflation-beating returns, bonds because they are less volatile and tend to provide a nice cushion when stocks are falling. A general rule of thumb is that once you are past 40, keep your age in bonds. So if you're 50, you might have 50 percent in bonds. If you're 60, then having 60 percent in bonds and 40 percent in stocks gives you a nice mix of growth and safety tied to your age.

Your mistake is that you made an "all or nothing" decision by plowing all your money into stocks. I'm curious about why you did that. Was it because you got swept up in the fact that the markets were reaching new highs in 2007? The reason I ask is that it's important for you to understand your financial behavior; otherwise you end up repeating mistakes. Chasing short-term performance is never wise.

And that's just as true right now. It would be a mistake to pull everything out of stocks now, because if you sell, you lock in your losses, losing all potential for gains when the market rallies. I don't expect stocks to fall another 40 percent, but I do expect the markets to go up and down over the next few years, and in the long run we may end up exactly where we started.

You want to set your target mix of stocks and bonds, and then slowly—over months, not weeks—begin to shift your money around. Try to sell stocks on any market rallies. I also recommend that you think about investing in mutual funds and exchange traded funds (ETFs) that focus on dividend-paying stocks of financially sound companies. I love dividends because they provide you with a quarterly or annual income stream, and getting paid even when stock values are declining is a smart way to invest in stocks during these volatile times.

I also want you to think about extending your retirement date. Vow to work an extra three to five years and you will do your portfolio a world of good. It gives you time to save more, it gives your investments more time to recover, and it delays your withdrawals. That's a trio of great moves to build (or rebuild) retirement security.

Suze Orman's latest book is her 2009 Action Plan: Keeping Your Money Safe & Sound (Spiegel & Grau).

Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.


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