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Stocks for sale

If you enjoy a sale, now's the time to check out stocks and stock mutual funds. The stock market decline means stocks and stock mutual fund shares are cheaper than they used to be. For instance, the popular Vanguard 500 Index fund, which tracks t...

Graphic: Stock market

If you enjoy a sale, now's the time to check out stocks and stock mutual funds.

The stock market decline means stocks and stock mutual fund shares are cheaper than they used to be.

For instance, the popular Vanguard 500 Index fund, which tracks the widely watched S&P 500 Index, is down about 2½ percent in the past month and about 15 percent in the past year.

The opportunity is greatest for investors who don't need their money right away and can wait for the market to rebound.

"If you have at least a three-year time frame, you'll want to consider chipping away" at investing in stocks, said Matthew Stucke, an Edward Jones financial adviser in Fargo.

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Putting a big chunk of cash into stocks or stock funds all at once is a bad idea because the market could drop more.

Moving cash into stocks gradually, in several relatively small purchases, is a better option, Stucke said.

Don't assume none of this applies to you because you have no spare cash to invest.

Anyone with a 401(k) plan at work potentially can take advantage of the stock market slump, too.

About two in three private-sector workers participate in a 401(k) plan, according to the Washington, D.C.-based Employee Benefit Research Institute.

Most plans offer a mix of investment options, typically funds investing in stocks, bonds and cash.

If the percentage of your investments in stock funds is low, with most devoted to bonds and cash, consider increasing the portion allocated to stock funds, financial advisers say.

This is especially true if you won't need the money for at least 20 years, said Keith Burck with Alerus Securities in Fargo.

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Stocks, despite their ups and downs, provide better returns over time than cash and bonds, he said.

Investors in 401(k) plans also can look at rebalancing their investment mix.

Say you originally had

80 percent of your 401(k) investment in stocks and 20 percent in cash.

Now, after stocks have slumped, the percentage in stocks will be higher and the percentage in cash will be lower.

Rebalancing means readjusting the percentages to the original 80 percent/20 percent mix.

Rebalancing has its drawbacks, particularly when the market is enjoying a long rally, Burck said.

But the practice can make sense for long-term investors who want to take advantage of market declines, he said.

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A final word on 401(k) plans:

Some Americans, faced with rising living expenses, are contributing less to their plans.

A survey last month of 152 financial advisers by Boston-based Putnam Investments found that 21 percent of 401(k) participants recently have cut back on contributions and 4 percent have stopped contributing altogether.

Greg Sweeney, chief investment officer with Fargo-based State Bank and Trust, said he understands that high fuel costs and other expenses can influence decisions about 401(k) contributions.

"But it's important to keep contributing," he said.

Readers can reach Forum reporter Jonathan Knutson at (701) 241-5530

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