Volatile investment markets have been headline news in early 2008 as major markets and exchanges all over the world have reported declines in value. During periods of significant market volatility, even the most disciplined investors may find it challenging to maintain a steady course.

By their nature, markets change to reflect different economic cycles and developments. During periods of growth, the idea of volatility doesn’t attract the same sort of attention – and concern – that occurs during periods of decreasing values. Declining values aren’t an unexpected or unusual occurrence; they’re a natural part of the market cycle that plays out every seven to ten years.

Investors of all types - including plan members who are saving toward retirement – should remember these general guidelines when considering their strategy for managing a market decline.

Maintain a long-term view. Investment markets have a regular cycle that will include periods of growth along with periods of decrease every seven to ten years. Specific peaks or valleys shouldn’t be the driving force investors use to plan their overall strategy.

Consider changes to your investment approach carefully during a period of low value. A plan member who moves out of investments when values are low may forfeit the opportunity to recover lost value during the next cycle of growth.

Diversify your holdings. Different types of investments perform in different ways during contrasting market periods. Plan members who hold a variety of investment instruments (fixed income investments and equities, for instance; domestic and international investment funds) are less likely to feel the effects of market movements as sharply as those whose savings are concentrated in one sector or fund. Certain types of funds are designed to hold a range of instruments to take advantage of all cycles of the market.

Remember the value of dollar cost averaging. A regular contributor to a retirement savings program makes continuing contributions that buy units of funds at all cycles of market. This approach buffers the effects of high and low cycles over time. During low cycles, regular contributions have more purchasing power.

No one knows how long any specific market cycle will last and reacting to a particular event or cycle is rarely in a plan member’s best interest.

A plan member who wants a detailed review of his or her personal situation should contact their CBIA Authorized Representative for an individual evaluation. Most plan members – particularly those who don’t plan to retire for ten or more years – will benefit from maintaining a long-term view of investments, building a well-diversified retirement savings portfolio, and remaining patient when markets move through volatile cycles.