Investment fundamentals

Key Points

Savings and investments for retirement and other purposes have been battered to the point where many people report losing sleep trying to decide whether their hard-earned money is safe, and whether they should be taking steps to protect it.

Here is how the experts are responding to the most frequently asked questions:

As long as your bank is a member of the Federal Deposit Insurance Corporation (FDIC), all of your deposits are insured up to the limits of FDIC coverage - $250,000 per depositor, per bank, until Dec. 31, 2009. After that, the limit returns to $100,000.

Despite many bank failures over the years, not one penny of money covered by FDIC insurance has ever been lost.

Should I sell all of my stocks?

It would be difficult to find a financial professional who would advise you to dump all of your stocks, especially at this time. While the downturn in today's stock market is a legitimate source of concern, it's a far cry from our worst.

The most recent bear market - March 2000 to October 2002- saw a drop of 49 percent in the S&P 500 index. Like every bear market preceding it, that one was followed by a healthy bull market that set new highs in stock prices.

"Fluctuations in the market are a natural part of our economic cycle," says Stacy Francis, Certified Financial Planner, New York.

"When the market is in a downturn, it may seem logical to cash out, but before you do that, you may want to think about your long-term goals for that money," Ms. Francis says.

According to studies by Ned Davis Research, since World War II, the average expansion in our economy lasted 57 months, while the average recession lasted 10 months. In the past 20 years, according to the study, we haven't had a recession that lasted longer than eight months.

That's why it's important for you to keep a long-term view for your investments. When the market is in a slump, it's only natural to worry that it will never end. It will end, and when it does, investors with the foresight to buy when prices were low will benefit the most.

Should I monitor the economy?

"In an effort to sell newspapers and air time, the media trains investors to look out for the next economic number of the day," says Jordan Kimmel, Magnet Investment Group, Randolph, N.J.

"Whether it's employment numbers, capacity utilization or inflation statistics, there's always a number of the day to tempt investors into overreacting.

"In reality, it is nonsensical to react to daily economic reports. No investment strategy is better than identifying superior companies and holding them while letting your money compound over time," Mr. Kimmel says.