Spain + Korea = Dow Below 10,000: Here's What To Do Next

Last Updated May 25, 2010 10:29 AM EDT

Remember how happy we were when the Dow crossed 10,000 last summer? It's not as much fun now, is it? This morning, the dual concerns over the European debt crisis and tensions between North and South Korea were too much. Stocks gapped down on the open and as I write this, the Dow is nestled under 9900.

It took a few days for investors to realize that Spain's nationalization of regional bank CajaSur could be a harbinger of bad things to come. Analysts now expect that Spain's bank clean-up could cost the country as much 35 billion Euros. Meanwhile the rhetoric is heating up on the Korean peninsula over the North Korean sinking of a South Korean ship and with investor nerves already frayed, stocks had nowhere to go but down.

I reviewed my advice to investors when we crossed 10,000 on the way up and guess what? It's the exact same advice that I'm providing today!

Now that you don't need anti-anxiety drugs to open your retirement statement, the market's move up may provide you with some opportunities. But be careful not to jump in just because stocks are up-after all, the Dow could could return to 9,000 in a hurry!

Still, this is an ideal time to take a moment to consider your situation and create a financial game plan to help you get where you want to go.

Start with a risk assessment test. Since the Dow first nudged over 10,000 last July, your personal life may have changed - perhaps your job situation and/or income might necessitate a new approach to your investing. Of course with the massive stock market moves, you should have a better understanding of your risk tolerance.

Once you have that done, you may not want to jump in or out all at once. Here are three general categories of investors who might want to take action as the Dow crosses (and re-crosses) the 10,000 threshold again:

  1. FRAIDY CATS WHO HAVE LOTS OF CASH : Maybe you sold the top (you're a genius!)...or maybe you cashed out at the bottom (you were panic-stricken). Either way, if you're really ready to assume risk again, then stop driving yourself crazy and dollar cost average until you reach your desired allocation
  2. OVER CONFIDENT WHO STAYED IN RISKY STUFF THE WHOLE WAY: Are you still feeling confident? If so, maybe you don't have to do anything at all. If you are too anxious now, remember that the stock market is still up nearly 60% from the March 2009 lows, which gives you a great opportunity to trim the risk that you have.
  3. BALANCED INVESTORS: You stuck to a disciplined approach, which is great, but now it's gut check time-is the recent leg down a reason to keep a little more money in the safe stuff? Or maybe you are feeling more secure and can assume a little more risk.
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    Jill Schlesinger, CFP®, is the Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.