Voice of reason irritating, yet right on, about money

Every January, my husband and I update our finances, but this year's review nearly sent me over the edge.

Last week, as we were tabulating our assets, I looked at the latest statement from my 401(k) retirement plan. In the first 18 days of this year, the portfolio was down 10 percent, losing -- at least on paper -- more than $30,000.

Beginning to panic, I began to pull the statements on our other investments. More bad news. A fund we use to save for our children's college expenses was down by about $8,000. My husband's federal government Thrift Savings Plan had dropped 6.4 percent, or $20,000, in the same period.

"Honey, we've got to do something," I said, worry rising in my voice.

That panicky feeling is one shared by many investors these days, as markets around the world tumble. The Dow Jones industrial average, the Nasdaq and the S&P 500 stock index all have been dropping at alarming rates.

Such huge losses can shake even the most informed, experienced investor.

Probably more than many investors, I understand that markets go up and down. Sometimes the down is drastic. I know that. Still, I could feel my blood pressure spiking. I was panicking.

Many experts warn against panic in the face of an unsteady market.

"Pulling your money out when everything is tanking is just not a good idea," said Don Blandin, president and chief executive of the Investor Protection Trust, a nonprofit investor education organization.

If you don't need your money for years to come, stay the course, Blandin and many other experts advise. Even if you're close to retirement and you haven't rebalanced your portfolio recently, you still may want to sit tight "until the dust settles," Blandin said.

Historically, the U.S. stock market has had annual returns averaging a little more than

10 percent, assuming you reinvest dividends, we are reminded. So we are told not to let the daily gyrations of the markets scare us.

But how can it not scare you? For many of us first-generation investors, this isn't about having enough money to buy a more expensive car or a second retirement home.

For many, this money means being able to retire comfortably -- before we need a cane. It means being able to pay for a child's college education, sparing the family an onerous debt burden.

Thinking about the potential consequences of the market downturn upset me more by the minute.

I ranted to my husband about not being able to retire when we want or not having enough money for the kids to go to college. We want to retire before 65. And we have three kids to put through school.

Thankfully, in my house, there was a voice of reason: my husband's.

In his usual calm and soothing way, he just kept working on our budget and yearly net-worth assessment, trying to ignore my agitated state.

Then, he finally looked up. "Baby, we don't need this money for a long time," he said. "We can ride this out."

OK, right here I could lie and say I quickly snapped back to my senses and responded, "Oh you are so right, sweetie. What was I thinking?"

The truth is, I wanted to slap him upside his head -- in a light, loving way, of course. I mean, was he looking at the same current-balance reports? But my husband was right to encourage me to stay calm. And for the most part, so are the experts, even if some of them work for financial services companies that have a vested interest in keeping us in the market.

My husband reminded me of our investment strategy, called dollar-cost averaging, which means we invest at specific times, regardless of market conditions. Regular amounts of money go every month into our retirement plans and our children's college funds. This way, we buy more shares when stock prices are low and fewer shares when prices are high.

It took me a few days, but that sick feeling in my stomach subsided. I'm still worried, but I'm not petrified, because we've followed our financial planner's advice over the years. We regularly rebalance our portfolios. We have diversified our investment holdings.

It is times like this when you have to keep in mind that investing means taking risks.

In fact, I like the way Blandin views it. Think of investing as being on a merry-go-round, he says. There are going to be ups and downs. However, if you aim for steady growth by diversifying in stocks, bonds, cash and other types of assets, then it won't be a roller coaster ride.

"You don't have the deep highs and the deep lows," Blandin said. "But when you get off the merry-go-round, you aren't sick."

Write to Michelle Singletary

in care of The Washington Post, 1150 15th St. N.W., Washington, D.C. 20071, or e-mail her at