By David Pitt, Personal Finance Writer
DES MOINES, Iowa (AP) — Millions of 401(k) accounts have made up lost ground over the past 10 months. Helped by a stock market surge and continued contributions, the question now is how to keep from backsliding when market momentum slows or reverses.
With the market up more than 60% since it hit its low in March, the rapid rise in the market has many believing that a sharp downturn, or a correction as Wall Street calls it, is likely. The last thing investors can stomach is the market reversing itself and snatching away more of their retirement money.
So, what to do now?
Don't forget the fundamentals. Experts recommend revisiting the basic principles of investing, and offer some additional moves to consider.
A starting point for those who are heavily reliant on their 401(k) is to make sure their portfolio reflects their appetite for risk. This is a personal choice because it should be centered on how much longer you must work to meet your retirement savings goal and how comfortable you are with losing some of your money.
A key focus in making this assessment is to determine if you have an appropriate asset allocation. This means choosing a blend of stocks, bonds, cash investments and other options such as commodities or real estate. A variety of investments helps lessen risk because different assets generally don't move up or down at the same time.
The next step is to look within those asset classes to determine if you're properly diversified. This investing approach enables investors to adjust the risk in their portfolio by including a mix of a certain type of investment, say, large and small company stocks, as well as stocks from foreign and domestic companies.