Tell them to hang on tight.

The Dow has plummeted over the last few weeks, and third-quarter 401(k) statements are brutal. Stocks are down 40% from a year ago, wiping out gains accumulated over many years.

How bad is it? In a recent PBP survey, 84% of CFOs said their companies were feeling the economic hardship. The No. 1 symptom? The performance of the companies’ 401(k) plans.

So what does a responsible CFO tell employees?

It might sound boring, but now is the time to go over the basics. Calling a special meeting and going over some helpful tips can help employees release some stress and get back to work.

First, remind them that any selling they do now turns their paper losses into actual losses. You want to buy low, not sell low. If you sell now, in effect you’re saying you can beat experts like Warren Buffett when it comes to market timing. He thinks stocks are undervalued now, so he’s converting cash into stocks, not the other way around.

Second, remind workers how important asset allocation is. Very sadly, I’ve talked to employees who were over 60 and who were nearly 100% invested in stocks. That just isn’t prudent. Now they have to wait until the stock market snaps back (which I think it will eventually). Asset allocation can be done by individuals. The idea is to gradually convert stock into bonds as you get older. A better approach (when possible) is to find funds that automatically do that for you. For example if you’re planning to retire in 2020, look for a 2020 retirement plan or the like. Our company offers a “goal manager” fund that does this for employees.

Third, tell employees who feel they must make a change to consider moving all new investment allocation money into more-conservative alternatives. Alternatively, tell those with far greater risk tolerance to consider moving new investment allocations to 100% stocks — remember, at these prices, Warren Buffett thinks he’s getting a bargain!

Finally, for younger employees, stress how much time they have ahead of them. Today they can buy stocks and mutual funds at 1998 prices, and that’s a heck of a deal. If you bought stocks during the ’70s, essentially you bought 10 years’ worth of stock at the same low price, then had a marvelous two-decade appreciation in value. That’s not to say the exact same thing will happen again, but time and prices are in their favor.

In our weekly “Ask the Economist” feature, our resident Economist, Mike Donnelly, tackles your questions about the economy. If you’ve got a question — and no topic is too big or small — you’d like him to field, e-mail us at economist@pbp.com or leave your queries in the comments section.

Tags: 401(k), CFO, Dow, Economic hardship, PBP, Recession, Stocks