Lets Talk Money Online - Rethinking how to invest for retirement

The last decade's stock market performance seemed almost wild enough to require motion sickness pills for some investors. Huge swings in the market, including big declines and increases in equity prices, were the norm for the last 10 years. Now, as you near retirement, how do you calibrate -- or recalibrate -- your retirement portfolio so that it doesn't swing in value so wildly?

In the recent past, the stock market's performance doesn't look pretty. The Standard & Poor's 500 (S&P 500) Index, the standard bearer when it comes to large U.S. company stocks, had a wild final five years of the last decade. The index generally increased from early 2005 until the third quarter of 2007, when the bottom dropped out. Then the index lost more than half its value, only to begin rising again in early 2009.* If you recall, early in the decade there was another boom, bust and then boom again as the tech bubble grew and burst, so volatility was the norm for the decade.

That volatility continued throughout 2009, when the S&P 500 Index returns rose 23.45%, no doubt helping some investors to breathe a little easier after previous losses. But when the S&P 500 Index's performance from the beginning of 2005 through the end of 2009 was tallied, it increased less than one-half of a percentage point.* In the past, conventional wisdom had always been that stocks, as an asset class, would generally outperform other investments over time. That wasn't necessarily the case during this five-year period when the market fluctuated significantly. It is important to keep potential market volatility in mind as you work on your own personal financial strategy.

In any event, recent investment performance is one reason to regularly revisit your asset allocation.** Perhaps a smaller portion of stocks as a percentage of your overall portfolio makes you more comfortable, depending on your risk tolerance, time horizon and financial goals.

Another reason to reexamine how you invest remains a constant in good markets and bad. If you're drawing close to a financial goal, such as retirement, it's only natural to protect any gains and invest a larger portion of your portfolio in more stable investments. Talk with a registered representative to develop an investing strategy that fits your situation.

** Asset allocation won't guarantee a profit or ensure against a loss but may help reduce volatility in your portfolio.

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