In the last 12 months the Dow has dropped 38%, the NASDAQ has fallen 37%, and the Bernie Madoff Index is down 100%. Chances are you’re not feeling very inclined to put any of your hard-earned money into the stock market, and that’s understandable. But before you stick all your assets into a high-yield savings account, The New York Times recommends taking a look at your overall financial picture. Depending on factors like your career and your age, you may want to consider adding more risk (and possibly more return) to your savings strategy:

Kevin Brosious, a financial planner in Allentown, Pa., polled the students in his financial management class at DeSales University on the percentage of their portfolios they would allocate to stocks right now. The majority would put less than half in stocks; among their reasons were fear of job loss, lack of accountability on Wall Street and economic fears amplified by the news media.

The problem with their approach, according to Mr. Brosious, is that by investing conservatively they are probably guaranteeing themselves a smaller return and a more meager standard of living in retirement.

Or, as Robert N. Siegmann, chief operating officer and senior adviser of the Financial Management Group in Cincinnati, wrote to me in an e-mail message, “Why would you consider taking less risk NOW after most of the risk has already been paid for in the market over the past 12 months?”

And if the stock market still feels too risky:

one sensible way to reduce overall risk is to pay down high-interest debt, like credit cards or private student loans. That, at least, offers a guaranteed return, since every extra dollar you pay now keeps you from having to pay more interest later. Also, the sooner you rid yourself of debt payments, the less you would need in your monthly budget if you lost your job.

Read the whole article here.

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