1. Breathe

The natural response to tough economic times is to panic. The fear of unemployment mixed with thoughts of a delayed retirement or not having enough money to send your kids to college usually results in making emotional decisions about your investments. Because the decisions you make now will affect you once the economy recovers it is imperative that you stop, relax and take a breath before making changes in your investment accounts.

2. Review Your Asset Allocation

Proper asset allocation is one of the most important areas to focus on during turbulent times. Not having the correct balance of stocks, bonds and cash that reflect your risk tolerance and target retirement date can have an irreversible effect on your account. The percentage of stock in your portfolio should decrease as you move closer to retirement. Stocks are risky and taking high risk with no guarantee you’ll receive with high returns is a bad idea when close to retirement. It’s also important to keep in mind the number of years you’ll have to regain loses from an improperly allocated portfolio decreases the closer you get to retirement. A simple way to estimate what percentage of your portfolio should be invested in the stock market is to subtract your age by 105, the number you get is the percentage of your money that should be invested in stocks.

3. Ensure Your Diversified

Evaluate your investments to ensure not all your eggs are in one basket. Think Enron. Employees invested all their money into one company and when their company went under so did their entire retirement account. In some cases, people lost their entire live savings. To prevent this from happening you should be exposed to a variety of investments vehicles including stocks, bonds, mutual funds and cash. The risk levels, type of companies, and their geographic location should also vary. By diversifying your investments, you automatically offset large losses in one area by gains in another.
4. Stay Informed

Now is not the time to ignore announcements from human resources or trash investment statements before opening them. Amongst other changes, many companies have decided to temporary suspend matching retirement contributions and some are even changing the investment options available in their plans. Changes in the investments available may disturb both the asset allocation and the diversification of your account. Staying informed will enable you to be proactive in making adjustments that may be necessary because of the changes your employer has made to your plan.

5. Ask For Help
If investment talk makes you, crazy and you don’t feel completely comfortable developing your own investment strategy you may need to call on a professional for help. Your first stop should be your employer. Some employers offer access to financial professionals that will give you guidance on your accounts free. Non-profit organizations and government agencies are another resource you can turn to for help. The New York City Department of Consumer Affairs’s Office of Financial Empowerment launched the Financial Education Network (FEN). FEN is a directory of financial counselors, workshops and classes that can help you with your investment questions.