Don't crack if nest egg is falling

Even if you have decades to work until retirement, the stock market's downward trajectory is unsettling. How should young workers invest their 401(k) contributions in these unsettled times? Here are some tips:

Nate Wenner, certified financial planner for Wipfli Hewins Investment Advisors: As he explained, part of his job is making sure clients don't switch their long-term investment plans just because the market is behaving badly. You didn't think stocks always went up, did you?

For someone with several decades until retirement, Wenner suggests having at least 80 percent in stocks because “that's your greatest opportunity for growth.” If you are investing 90 percent of your contribution in equities, he suggests this mix: About 40 to 50 percent in a large company stock fund, 15 to 17 percent small-cap stock fund, 20 to 24 percent international developed market mutual fund, 7 to 8 percent emerging market stocks. For bonds, Wenner suggests investment-grade corporate bonds and government bonds for two-thirds of the bond portfolio and the rest in foreign bonds and high-yield, higher-risk bonds.

If you aren't thrilled with your workplace options, Wenner advises thinking about opening an after-tax account such as a Roth IRA after you invest enough in your 401(k) to get matching money from your employer. “When you get outside the 401(k) you get a little more flexibility,” he said. Accessing the cash without penalty is also easier, but Wenner warns against thinking of a Roth IRA or brokerage account as a savings account. Otherwise, you'll be tempted to tap it for that TV you've been coveting.

Martha Pomerantz, co-chair of Lowry Hill's investment committee: “Sign up for your 401(k) and never look back.” For those with a long time horizon, Pomerantz would go for 100 percent in stocks – 70 percent in a Standard & Poor's 500 index fund and 30 percent in an international fund. Index funds are good because expenses, which shave points off your return, are lower.

If you want to get fancier, Pomerantz would put 35 percent of the U.S. stock allocation in the S&P and the other 35 percent into a managed mutual fund “that has a record of good stock selection over time.”

Bill Reichwald, managing partner, Thrivent Financial for Lutherans in Minnesota: His priceless advice for young investors? “Do yourself a favor and quit looking every day” at your retirement portfolio. Also, “focus on time (in the market), not (market) timing.” In other words, keep investing your money every paycheck into your retirement plan and stop fixating on whether to get out.

If you're new to investing, Reichwald says to figure out how much risk you can handle. Try using your retirement plan provider's online questionnaire. If you have little knowledge about stocks and little desire to learn, consider a “set-it-and-forget-it” fund such as a lifestyle fund. These funds pick your mix of investments based on risk tolerance or your planned retirement year.