Bear versus Bull

At work I get asked by colleagues what to do with their retirement allocations in lieu of the declining market. Given my background in banking and financial services, I keep pretty close tabs on what is going on. I am by no means an expert. However, I do get asked for advice all the time. When people consider cashing out assets to re-invest, or to drastically alter their investment allocations, my best advice is to take things in stride and not be knee-jerk about it. I liked the following two points in today's issue of Money Magazine.
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Remember your investing goals:

The problem in big market drops like these, they tend to make us forget the real goal of all our savings and investing. That's to stash away enough money to maintain your current standard of living in retirement.

Much more important than your fluctuating monthly balance today, is the one you see 10 or 20 or 30 years from now, when you actually need that money. In that time, stocks will go up and down and up and down again. So the fact that your 401(k) is down 20% from what it was eight months ago may not have much bearing on what you will have in retirement.

Put today's economic peril in perspective:

Before you panic over today's headlines, and how far stocks could fall, consider the relative good health of today's economy.

1) In the early 1970s, economic output was falling. But today, despite the sluggishness, GDP is still inching ahead.

2) In the early 1980s, unemployment hit 10.8%. Today, the rate is 5.5%, or about half that.

3) Inflation topped 12% in the 1970s and 14% in the early 1980s. Today, it currently is at 4%.
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My advice is to ride it out. If you don't have a substantial rainy day fund set up, than yes, you should allocate funds to building that bucket of money. Despite the ups and downs our investment funds are yielding substantially more than any savings or online savings rate we could get in today's current banking / credit union sector.