Dear Dr. Per Cap: I received my end of year 401k statement and my account was down for the year, even when factoring in my contributions and my employer’s match.  This is not cool.  I opened my 401k when I started a new job last spring so I can start saving for retirement and I’m already losing money.  What can I do?

Signed, Worried in Washington

Dear Worried

2018 is officially in the books and unfortunately it was a rocky year for investors.  Nearly all capital markets-global stock indexes, bond mutual funds, currencies, and commodities ended the year on a down note.  Many investors like yourself saw their portfolios take a nose dive to close out a whirlwind year that brought us Popsockets, Incredibles 2, and the Washington Capitals first Stanley Cup victory – yes, I’m a hockey fan!

Here’s my advice – stay cool and learn some terms every new investor should know, realized and unrealized losses and gains.  I’ll talk some sports to help explain.  Say your favorite basketball team is down 10 points with three minutes to go in the second half.  They’re losing but there’s still time to turn it around and win the game.  An unrealized investment loss is similar to a team that’s losing but hasn’t lost.  Here’s an example: you purchase an investment for $5,000 that performs poorly.  Six months later the investment is only worth $4,500.  However, you hold onto the investment and don’t sell it.  Because you haven’t sold anything it’s considered a $500 “unrealized” loss or a “paper” loss.

The funds inside your retirement account are experiencing unrealized losses because they’re worth less than you paid for them, but as long as you don’t sell you haven’t lost a dime.  Moreover, just like a scrappy basketball team can pull off a come from behind victory, a struggling investment can climb its way back from an unrealized loss and turn it into a gain.

I know what you’re thinking: what if my basketball team doesn’t come back?  In that case the buzzer sounds and they lose.  You must be a Lakers fan – just kidding!  All joking aside, at this point an unrealized loss becomes a “realized” loss, meaning an investment has been sold for less than it was originally purchased.  A realized loss hurts a lot more than an unrealized one because like the name implies, it’s real – like Beyonce’s long hair.

Hey, if you buy that I’ve got a beach front bungalow in Tuba City, Arizona I want to sell you!

Getting back to your retirement account.  Investments like stocks and bonds, which is what most 401k’s are composed of, will fluctuate in value over time.  Some years your account will be up, other years it will be down.  And since I’m thinking you’re quite a few years away from retirement, you’ve got a long investing timeframe.  So don’t panic, keep up with those contributions, and especially keep enjoying those free matching contributions from your employer.  When investing long term, investment accounts with a healthy balance of stocks and bonds have an excellent track record!Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. For more information, visit www.firstnations.org. To send a question to Dr. Per Cap, email askdrpercap@firstnations.org.