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Financial Planning

In Tough Times, Stick With Your Plan

A fighter pilot worries about the market, but he continues to buy.

WHO: Josh Andrews, 32, Married to Kelli, and father of Eli, 2
WHAT: Captain, USAF
WHERE: Moving to Creech AFB, Las Vegas
SYMPTOM: Spooked about his investments. Plus, he may change careers in a few years.

Josh's job flying F-15s is dangerous enough. But these days, managing his investments can seem just as perilous as he watches stocks tumble toward earth.

Fortunately -- and perhaps not surprisingly for someone trained at the Air Force Academy -- Josh is disciplined. Even though his six stock funds have lost from 28% to 46% so far this year, Josh diligently adds a few hundred dollars a month to several of them for his Roth IRA and his wife's spousal IRA. He is surprised by the extent of the losses, but not terrified. "I see the current market downturn as an opportunity to buy cheap," says Josh.

That's the right attitude for someone saving for a goal that could be 30 or so years away. The market's collapse has one important benefit: Lower prices today almost certainly guarantee better long-term returns in the future. Stocks are cheap based on earnings, dividends and corporate assets, as well as in comparison with Treasury bonds, money-market funds and gold.


But this is no time to try to be a wise guy by betting on individual sectors. It's more important for Josh to position himself to make up for some of the ground lost in the past year. To the degree that he is feeding respectable mutual funds run by experienced managers -- Josh's include Baron Asset and CGM Realty -- he should stay with them despite this year's awful results.

Beyond specific investments, Steve Horan, head of private wealth management for the CFA Institute, says people need to stick with their plans. For example, if you have enough to pay your bills without borrowing even after deferring 12% of your income for retirement, keep doing so.

Only if you find yourself running up large credit balances or draining your bank accounts does it make sense to trim retirement-plan contributions -- and then only temporarily. The exception: If you lose your job or your business is failing, you need cash more than you need stocks and mutual funds.

As a military officer, Josh isn't in danger of getting laid off. So there's no reason for him to starve his IRAs. If he makes the Air Force his career -- meaning he remains on active duty 12 more years, to give him a total of 20 -- he'll qualify for retirement and veterans' benefits that become increasingly valuable with promotions and seniority.


But there's a chance that Josh will leave the military as soon as three years from now, though he's not certain what he will do. His problem is that the most natural career switch for someone like him -- moving from flying military jets to flying commercial planes -- is up in the air, so to speak, because of the airline industry's dire condition. Josh also has thoughts of becoming a financial adviser.

But whether he takes off the blue uniform or keeps it on, the best advice he could take is to keep investing for a future that is unlikely to be as grim as today's headlines.

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