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How Can I Get My Retirement Account Back on Track?

The current economy has generated many changes in the financial industry. New rules coming with the Credit CARD Act have les creditors to find creative ways to remain profitable.

But many consumers have not been profitable when it comes to their investment accounts. The stock market drop of 2008 sent many investors to the sidelines with the much smaller remaining balances of their retirement accounts.

While many investors slowly started to inch their way back into the market in 2009, some are still hesitant to do so. Here are a few tips to help get those investment accounts back on track moving forward.

Get back in the market

The most important step to recovery is to stop sitting on the sidelines. As scary as the market may be (or have been), there will be no recovery if the money is not invested.

At best, sitting in cash will protect what is left. Unfortunately, as the cost of living continues to rise, the spending power of that money falls. So, in effect, the money continues to shrink.

There are ways to get back into the market with less risk. There is no guarantee that there will not be periods where the account balance falls. However, the chances of recovery are better when the money is invested.

Dollar cost average

One way to ease back into the market is to dollar cost average. This means that investments are purchased at regular intervals over a designated amount of time. Some investors choose to dollar cost average monthly over six to 12 months.

Dollar cost averaging helps reduce the risk involved with market timing. Since all money is not invested at one time, the investor does not have to worry about whether the date the money was invested was a "bad" time or a "good" time.

Investing a portion of the account balance each month enables an investor to buy shares of each investment at different purchase prices. Some months, the market will be doing better and the purchase price will be higher. When this occurs, fewer shares will be purchased.

Some months, the market will be down and the purchase price will be lower. This is actually beneficial because the investor will be able to purchase more shares. Over time, this strategy increases the chances that the average purchase prices of the investments will be lower than if they were purchased all at once.

Consider more conservative investments

Another tip for easing back into the market is to consider less risky investments. There are many options. There are mutual funds designed to invest in more stable investments.

For example, many fixed income mutual funds invest in short-term notes and bonds. Investors can better diversify a bond portfolio by blending short-term, intermediate-term, and long-term maturities.

An investor can also consider using mutual funds that combine fixed income with dividend-paying stocks. While there is some additional risk when including stocks, there is also the potential for higher returns. These mutual funds may be called conservative allocation or moderate allocation mutual funds.

After such a market scare, it is understandable why many investors do not feel comfortable jumping back into the market. If the investments are not carefully researched and a portfolio is not closely monitored, an account can quickly fall off of the deep end.

However, there are ways to comfortably get back into the market. Dollar cost averaging and choosing more conservative investments can enable investors to begin working again toward those retirement goals.

About the Author:

Ozeme J. Bonnette is a financial coach, speaker, and the author of Get What Belongs to You: A Christian Guide to Managing Your Finances. After working at Merrill Lynch, she chose to focus on increasing financial literacy. She teaches Biblical Economics and speaks to groups and organizations throughout the U.S. She earned 3 Bachelor's degrees at Fresno State and an MBA at UCLA's Anderson School. Find her at www.thechristianmoneycoach.com .

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