Investing after the crash

The stock market has tanked and come back many times before, but it can be tough for the average investor to take a big hit without freaking out.

Financial adviser Joe Allbright knows this, and he's telling clients the same thing he said after the markets plunged post 9/11 - don't panic, and don't start filling out withdrawal slips.

"During times like this it gets kind of scary for folks, especially if they have all their money in equities," Allbright said last week. "Over the last 75 years, having your money in equities is the best place to be if you have the kind of temperament to ride it out. We've had wars and terrorist attacks and other things, but still in the long haul, (the stock market) is the best place to have your money."

National and overseas markets haven't seen much relief since President George W. Bush signed Wall Street's $700 billion bailout bill Friday. The Dow fell below 10,000 for the first time in four years Monday morning and credit markets remained under strain.

Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France's BNP Paribas agreed to acquire a 75 percent stake in Fortis's Belgium bank after a government rescue failed.

"I think it all stems off this sub-prime loan thing," Allbright said. "The government for years encouraged and practically forced lenders to loan money to people who, back in the day, wouldn't have got a loan. They threw underwriting out the window."

Allbright said stock market downturns typically last for a little more than a year, but investors who continue contributing to 401(k)s and IRAs despite the jolt of seeing share-price drops could end up on top when the market recovers.

"They're buying stuff on sale," Allbright said. "You're lowering your total cost of shares by staying with the plan."

Good news for the young professional with decades before retirement - not so good for someone who's ready to hang it up.

Allbright said workers need to stay in the game if their nest egg took a hit and they're planning on retiring in the next year. That'll give the market time to adjust.

For those who have been lucky enough to retire before this month's stock market crash, safety comes first. Allbright suggested setting up an income annuity for the first 10 years of retirement.

"You can set up that annuity to last 10 years or your lifetime," he said. "What you have in equity will help you keep up with inflation in the long haul. There's a lot of piece of mind in setting up something stable like that."

Assistant City Manager James Zentner said Odessa's investment portfolio has been insulated from stock plunges, mainly because of the type of investment pools the city has money in. They bank on returns from bonds and CDs.

County Auditor David Austin said the county's in good shape too.

Zentner said the city might have a problem issuing bonds in the future because of the credit crunch.

"Financial markets are in turmoil today, and until they get them straightened out, it's hard to know where to put your money," Zentner said.

The Associated Press contributed to this report.

WORD PLAY:

Here's a short dictionary to help make sense of financial lingo.

>> Mutual fund: An investment pool that uses people's money to buy stocks, bonds and short-term money market instruments.

>> Equities: Mutual funds that invest in stocks instead of bonds.

>> 401(k): An employer-sponsored retirement plan. You pick what percentage of your income you want to go into the 401(k) account, and your employer will match that or a percentage of what you squirrel away. Investors take those 401(k) funds and buy stocks with them so your money can grow over time.

>> IRA: Similar to a 401(k), but you can withdraw your money sooner without as many penalties. 

>> Income annuity: When you pony up part of your nest egg for an income annuity, that one-time payment is split up into monthly payments for whatever period of time you want. Then you'll get a check each month from the annuity no matter what's going on in the stock market. It's a way to make sure you have a steady source of income during retirement.