Are you one of those people who were afraid to open your 401(k) or IRA statements last January and/or March? I know I was. However, I never stopped thinking about contributing to what many people called “a sinking ship”: my investment portfolio.

If you have been thinking of stopping contributing to your company’s 401(k) plan, you are certainly not alone. The vicious drop in the stock market has left many long term investors shaking their heads and wondering aloud about the wisdom of investing. Worse yet, the current economic climate has led many to pull the funds they have invested and stuff them into the mattress. While this kind of reaction is certainly understandable given the extraordinary events we are witnessing, it is also shortsighted in the extreme, and these actions could end up having serious ramifications for those workers down the road.

In their panic, many investors to forgot one half of the all important buy low, sell high investment strategy. By stopping contributions now, workers are missing out on the opportunity to buy stocks and other investments at what are historically low prices. By pulling out money from their 401K or IRA portfolios, workers are turning the concept of sell high on its head. Recovering from those kinds of mistakes can be a daunting task indeed, not to mention the 20% tax hit which results from cashing out 401(k) before age 55.

While no one likes to see the value of their portfolio take a hit, employees with many years left to work have a very good chance of not only making back those losses but adding some significant gains along the way as well. Timing the market is a notoriously difficult task even for financial experts, and individual investors almost never manage to call the top or the bottom of a bear or bull market. That is one of the reasons why the long term approach to saving and investing has worked so well over the years.

It may seem counterintuitive to continue to throw money at a market that people fear could go back into freefall, but bucking the trend can pay off big in the end. The market seems to be recovering – I know my investment portfolio have come back significantly in the last 4 months. The truth is no one truly knows which direction the market is going to go, but by investing steadily over time workers can increase their chances at a fun and financially secure retirement.

If you need further evidence that continuing to invest in your 401(k) is a smart thing to do no matter what the market happens to be doing just consider the value of your employer match. Even in the midst of the recession many companies have continued to match the contributions made by their employees, and those who choose not to participate are leaving that money on the table.

Even if you don’t have a matching program with your 401K plan, the money you are saving is still pre-tax, which, depending on your tax bracket, essentially increases your funds by up to 39%.

So should you still contribute? Even if you don’t think the worse of the recession is over like I do, the answer is a resounding “yes”!

Related posts:

1. How to Manage Your 401K for 2009 My sister works for a financial services company and seems...
2. Top Indicators Things Really ARE That Bad I saw some of these posted online and added a...
3. Things You Can Do Now to Reduce Your 2009 Tax Bill No, it’s not too late to take steps to reduce...
4. Opinion: Capitalism, Socialism, Communism and the Free Market The health care debate, socialism, government take over of GM,...
5. What Exactly is in the new Economic Stimulus Plan – Part 1 It's all so confusing, isn't it? There is one program...