The stock market is beginning to resemble the bargain basement at Filene’s (a Boston icon well known to bargain hunters). Filene’s Basement is famous for its Dutch auction method of pricing sales goods…each day the price is marked down, until bought.

With a stock market in a tailspin and showing signs of taking no prisoners, legions of 401k investors will be looking at less than exciting quarterly reports this month as their holdings are being marked down day after day.

How one views his or her 401k depends upon a number of factors.

First, is the account still accumulating or about to be spent for retirement income?

Second, from a psychological viewpoint, how much risk can the owner handle? An investor whose emotions and moods are affected by the swings in the market is not a good candidate for holding more risky investments in his 401k.

Third, if other assets are available to fund retirement and the 401k is not likely to be spent immediately, it might be invested more aggressively than one where it is the sole source of retirement income.

Finally, each individual’s belief system plays a role by determining whether that individual believes the markets will either recover or remain in the dumps for years to come.

In future articles, we will take a look at these factors as they relate to 401k investing. This week we will focus on the accumulation phase.

For those who are still accumulating assets in their 401k, and believe the markets will eventually recover, today they can buy quality assets at “Filene’s” bargain basement prices.

When a fixed amount of money is invested in assets on a regular basis, the price of the assets will determine the number of shares purchased. The lower the price, the more shares purchased.

Try this little exercise. Take a statement from a year ago when the markets were higher. Count the shares of each fund or stock in your account. Compare that count to the number of shares you own today. Multiply that number by the share price a year ago. If you believe the markets will recover back to last year’s prices…and even go beyond that point…it should be obvious to you that continuing to put money into the funds, even with prices falling, is not a bad thing.

Trying to hide on the sidelines in money market accounts or short-term bond funds in order to time a market turn with a 401k is a crapshoot. If one could accurately time the turn, it makes no sense to be working at an ordinary job; CNBC would pay you big bucks to strut your stuff in front of a camera! Seriously, 401k plans are not intended to be market-timing vehicles.

A well-diversified account, with assets invested in large cap and small cap, both value and growth styles, and with some international thrown in helps smooth out the wrinkles of market volatility. As I noted in an earlier column, markets swing like a pendulum, and a diversified portfolio offers some opportunity to benefit from the swings in style.

Best bet for safety, or if you know you are going to be spending the money within the next year or so, might be the fixed account in your plan. Most plans provide a guaranteed account, similar to a deferred fixed annuity that is guaranteed to grow. These options normally require that the money stay in the fund for a period of time, usually one, two, or three years.