Talk Yourself off the Ledge

You're a smart investor and you're scared.

Yes, the market has rallied dramatically since mid-March — but will it last? There's good reason to be skeptical, given the terrible shape of the economy and still unresolved credit crisis. Indeed, bear markets often feature brief, exhilarating surges. Remember how the Standard & Poor's 500 index shot up 24 percent between late November and early January, and then dropped like a stone to a 12-year low on March 9?

Meanwhile, unemployment is rising. Your job is less secure. You're a lot closer to retirement than you were during the 2000–2002 bear market. Your portfolio is about 40 percent smaller than it was a year ago. You're not sure how much more risk you're willing to take.

Under the circumstances, wouldn't it be wiser to bail out of the stock market, at least until everything gets a lot better? No, it wouldn't.

Your anxiety is entirely understandable. Anyone who isn't scared at this point isn't paying attention. But fear isn't a strategy. Step back from that ledge, take a couple of deep breaths, and listen to some common sense advice.

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