Where did all the money go? That's the plaintive cry as investors check the balances in their 401(k) plans or IRAs.

Strangely, they never asked how the money landed in their account as stocks moved higher. That was taken for granted. Well, don't look around now to find out who has "your" money. It disappeared as magically as it arrived. It's gone to "money heaven"!

We've turned ordinary Americans into portfolio managers of their own retirement plans, many of whom don't have the knowledge, perspective or self-discipline to make wise decisions. It shouldn't come as a surprise that, as prospects for the economy dim, fewer people want to own the businesses that those stocks represent. When investors rush to sell, prices go down -- and the money represented by those stock prices simply disappears.

Now, it's not just the financial stocks or the "risky" shares that have fallen 20 percent or more. Even the "good" stocks, the ones you'd planned to hold forever, are showing huge losses, caused by "panic selling." And for a while, the sellers will congratulate themselves. They "only" lost 30 percent, and now they can't lose more. But they can't make more either, unless they're better at picking bottoms than tops.

From 1980 to 2000, arguably the best two decades of the past century for the stock market, if you missed out on just the best 15 out of those 240 months, your total return was just slightly higher than a money market fund. That's the argument for younger investors: Keep on investing the same monthly amount in your retirement plan. Your regular $300 dollar monthly investment will now buy many more shares -- putting you in better shape to profit when the market does rally.

Of course, as you near retirement, you won't have years ahead of you to keep contributing. Watching the money melt away can be painful -- which is why we've talked about having some "chicken money" on the side, so you won't panic in market declines.

Didn't follow that advice? Now all you can do is ask yourself whether you'll feel worse if you don't sell and the market drops more, or if you do -- and the market rallies. When everyone decides to answer that question by selling, we'll be at the bottom.

Don't kick yourself for not selling earlier. And don't kick yourself later for missing the rebound. You're along for the entire ride. America's economy will grow again, and so will your stocks.

The lessons that cost the most, teach the most. If you didn't allocate some assets to safety so you can sleep at night, you've learned an expensive lesson. You'll get another chance to put it to good use, although that may be quite a few years from now.

And that's The Savage Truth!
Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column in the Chicago Sun-Times is nationally syndicated. She was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. Savage currently serves as a director of the Chicago Mercantile Exchange Corp.

If you liked this article you might like

Fidelity, BlackRock Escalate ETF War

Fidelity, BlackRock Escalate ETF War

Holiday Gift for the Hardcore Investor

Holiday Gift for the Hardcore Investor

Fidelity Opens World With Trading Platform

Fidelity Opens World With Trading Platform

Big Tax Decision Awaits Those With IRAs

Big Tax Decision Awaits Those With IRAs

Bonds Reclaim Limelight After Stock Rout

Bonds Reclaim Limelight After Stock Rout