The young: Time is on your side

When it comes to investing, the general rule is the younger you are, the more risk you should be willing to take on.

Put more in stocks, less in fixed-income investments. As you grow older, financial advisers say, you should gradually shift money from stocks to less risky investments like municipal bonds and certificates of deposit.

So it would seem that at a time when the market is in a downward spiral, investors in their 20s or 30s would be the hardest hit.

Maybe so, financial advisers said. But if you're young, don't panic. Time is on your side.

"If you are thinking about the money you are investing today and you're not going to be using it for 40 or 50 years, what happens in the course of a week or a month or even a year isn't all that relevant," said Stuart Ritter, a financial planner with T. Rowe Price in Baltimore.

Planners said you should have a financial plan in place at any age. That plan should not change, regardless of the volatility of the market.

"The market is cyclical," said Heather Evans, vice president for wealth management for Merrill Lynch in Vienna, Va. "It's to be expected that you will have corrections and turmoil."

If you are a young investor, you should not shift any of your money out of the stock market, advisers said. If your goal is to save for retirement, you should keep most, if not all, of your money in the market, Ritter said.

In fact, stocks typically have outperformed fixed-income investments by about 5 percent annually, said Fran Kinniry, of Vanguard Group.

Now might even be the time to buy more stocks if you can get them cheaply, said Ambler Cusick, a financial adviser in Smith Barney's Washington office.

"When clothes go on sale, do you run out of the store screaming or do you buy the outfit you've been looking at on the rack for weeks?" Cusick said.

That said, the stocks you have should be diversified, advisers said. Ritter suggested that 60 percent of your stock portfolio go to large-cap stocks, or shares of large companies; 20 percent to small- and mid-cap stocks; and 20 percent to international stocks.

If you plan to buy a house in two years, you should make sure any money you were hoping to have for a down payment is not in stocks. Instead, advisers said, that money should go into a money-market fund, which is less risky.

But young investors should also think beyond the stock market, advisers said.

If you're saddled with a lot of debt — be it in student loans, car payments or credit cards — you should use some discretion.

"I think the common mistake for young people out of school is to start investing before putting together savings reserve," said Helen Modly, executive vice president of Focus Wealth Management in Middleburg, Va. "You shouldn't invest in stocks as much until some of your debt has been paid off and you know you'll able to put new tires on your car."

You should also be putting up to 15 percent of your salary into your 401(k) retirement plan. That should not change with the market, advisers said.

But if you're still feeling unsettled, it might be time for a financial gut check, no matter how old you are.

"These times test the level of comfort you have with how risky you've been. You should be able to hang in there and go through it with the rational part of your brain working," said Mary Malgoire, president of the Family Firm in Bethesda, Md.

Also continue to plan for contingencies. Keep an emergency fund with three to six months of expenses, Ritter said.

And save, save, save.

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