Another approach to investing

When it comes to investing, the general rule is the younger you are, the more risk you should be willing to take on.

Put more in stocks, less in fixed-income investments. As you grow older, financial advisers say, you should gradually shift money from stocks to less risky investments like municipal bonds and certificates of deposit.

So it would seem that at a time when the market is in a downward spiral, investors in their 20s or 30s would be the hardest hit.

Maybe so, financial advisers said. But if you're young, there is no need to panic. You have enough time to plan your investment.

"If you are thinking about the money you are investing today and you're not going to be using it for 40 or 50 years, what happens in the course of a week or a month or even a year isn't all that relevant," said Stuart Ritter, a financial planner with T. Rowe Price in Baltimore.

Planners said you should have a financial plan in place at any age. That plan should not change, regardless of the volatility of the market. "The market is cyclical," said Heather Evans, vice-president for wealth management for Merrill Lynch in Vienna, Virginia. "It's to be expected that you will have corrections and turmoil."

If you are a young investor, you should not shift any of your money out of the stock market, advisers said. If your goal is to save for retirement, you should keep most, if not all, of your money in the market, Ritter said.

In fact, stocks typically have outperformed fixed-income investments by about five per cent annually, said Fran Kinniry, of Vanguard Group.

Bargain hunt

Now might even be the time to buy more stocks if you can get them cheaply, said Ambler Cusick, a fin-ancial adviser in Smith Barney's Washington office. "When clothes go on sale, do you run out of the store screaming or do you buy the outfit you've been looking at on the rack for weeks?" Cusick said.

That said, the stocks you have should be diversified, advisers said. Ritter suggested that 60 per cent of your stock portfolio go to large-cap stocks, or shares of large companies; 20 per cent to small- and mid-cap stocks; and 20 per cent to international stocks.

If you plan to buy a house in two years, you should make sure any money you were hoping to have for a down payment is not in stocks. Instead, advisers said, that money should go into a money-market fund, which is less risky.

But young investors should also think beyond the stock market.

If you're saddled with a lot of debt - be it in student loans, car payments or credit cards - you should use some discretion.

You should also be putting up to 15 per cent of your salary into your retirement plan. That should not change with the market, advisers said. But if you're still feeling unsettled, it might be time for a financial gut check, no matter how old you are.

Also continue to plan for contingencies. Keep an emergency fund with three to six months of expenses, Ritter said.

And save, save, save.