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Jim Lentini: Our most challenging year in business

Posted: January 19, 2009 9:26 p.m.
Updated: January 20, 2009 4:55 a.m.
 
The year 2008 was one of the most challenging years I have witnessed during my 46 years in the insurance and investment business.

It has been difficult for everyone and every business owner, as we have all been affected by the special circumstances that have created this financial crisis.

But, as it has been said many times: We have been here before and we have always recovered. And eventually we have enjoyed new periods of prosperity. Because we are part of a world economy, it is a global issue that has affected everyone in the industrialized world. The U.S. and the world economies are resilient, and that has not changed.

It's important when we see our retirement accounts diminished to keep a long-term perspective to get through this downturn. Around the world governments are doing whatever it takes to get the system running smoothly again.

Even China has had to reinforce its financial markets with infusion of capital from the government. But it will take time for these stimulus packages to have an impact.

Many years ago, a very wise old friend from Japan once told me, "The U.S. is like a big ship, it takes a long time to turn it around."

This has proven true, time and time again.

In keeping our long-term perspective, Americans need to stay the course and not sell out stock funds in 401(k), 403(b) or IRA plans. We are always told not to sell low. When the market is low, then that's a time to buy if you believe it will recover.

What about the paper losses you have already incurred in your pension plan and investment accounts?

Don't dump high-quality stocks and well-managed mutual funds that have been hammered. From today's depressed levels, stocks and REIT's offer stronger appreciation potential over the next few years than bonds and cash.

Most important, don't stop funding your retirement accounts. Keep making as big a monthly contribution as you can afford to get the maximum employer match in your 401(k). Put the new money into an appropriate mix of assets. Consult with your financial advisor and select a good mix allocation of various asset classes to minimize risk and to be ready for the upward movement and recovery.

Jim Lentini is president of Lentini Insurance & Investments Inc. in Santa Clarita. His column reflects his own views and not necessarily those of The Signal.

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