401K Question

[Outshined]

I have some money in my 401k. I think it is down about 10-15% this year. I am going to look more into it this week. Should I look at moving it to a gauranteed fund of 2%? I know diddly squat about managing this stuff.

 

Anybody doing anything with their 401k.

 

Any comments would be appreciated.

 

Thanks.

[Big Country]

how long until you retire?

 

How active do you want to be in managing your fund?

 

I am not a financial professional, so you realyl shuld seek the advice of one, but, if you do not want to be too active in the management, target date funds are an excellent way to have a blend of stocks, bonds and cash appropriate for your age and length of time until anticipated retirement.

[yo mama]

I have some money in my 401k. I think it is down about 10-15% this year. I am going to look more into it this week. Should I look at moving it to a gauranteed fund of 2%? I know diddly squat about managing this stuff.

 

Anybody doing anything with their 401k.

 

Any comments would be appreciated.

 

Thanks.

I'm seriously considering it. I'm sick and tired of watching my 401k lose value at the same rate that I'm contributing new money. If the market remains flat, I lose nothing. If it goes down, I win. I only lose if the market goes up. Does anyone really thing that's going to happen in the near future?

 

The trick, I think, would be to gauge when the right time would be to get back into the market. But let's say the market goes down 20% and then I get back in. I can basically buy all the same funds I had and own 25% more shares of those same funds compared to before I bailed out of them. Plus, you get your 2% return. Plus, you've protected all new money against losing value in connection with that 20% decline. Even if the market continues to go down after that you're still better off.

 

Oh, sure. The common thing everyone says these days is "I'm a long-term investor. I don't need this money for years, so I'm not going to panic. Stay the course." But I'm already regretting not cashing out earlier in the year when it was clear to me the real estate/mortgage melt down wasn't going to pass quietly. And if I'm wrong, hey: I'm a long-term investor and I don't need the money for years. So in the obscure situation where the economy is somehow on the precipice of a dramatic increase in value then I've got another 30 years to make it up for the lost upside. But at least I keep what I've already got. To me, at this point stuffing cash into a metaphorical 401K coffee can sounds like a pretty rational investment strategy to me.

 

Call me crazy, but I have absolutely no faith that the people in charge know what they are doing, or that they are putting the longterm national interest ahead of their own short term personal economic interests. This country's economic policies - from military spending, to rebate checks, executive comp, taxation, deficit spending, and entitlement programs - is so out of whack that I, too, am having serious reservations about the long term economic stability of this country. Having no debt, a good job, and a stack of cash in the proverbial coffee can sounds just fine to me.

Edited September 25, 2008 by yo mama

[Ursa Majoris]

I'm seriously considering it. I'm sick and tired of watching my 401k lose value at the same rate that I'm contributing new money.

If mine was doing that, I'd be cool with it. Mine is like a bathtub with the faucet left on and the plug out. $1 in, $1.25 out......

[Chief Dick]

Isn't the money you are putting in now a good thing in that you are getting investments at a discount? So would now be a good time to actually increase your contributions?

[Ursa Majoris]

Isn't the money you are putting in now a good thing in that you are getting investments at a discount? So would now be a good time to actually increase your contributions?

If you're confident the market will go up in time for you to recoup your losses by the time you need the money, sure. Dunno how long I can sustain losing hundreds of dollars a day though. This has been dragging on for way too long.

[AtomicCEO]

I'm seriously considering it. I'm sick and tired of watching my 401k lose value at the same rate that I'm contributing new money. If the market remains flat, I lose nothing. If it goes down, I win. I only lose if the market goes up. Does anyone really thing that's going to happen in the near future?

 

I do.

 

I'm no economist... but one of the generally agreed upon results of the bailout (aka, printing a trillion extra dollars), will be inflation. Inflation is where the price of things go up. Stocks are things.

 

I could be the stupidest person in the world when it comes to finance though, so this might just be crazy.

[Outshined]

how long until you retire?

 

How active do you want to be in managing your fund?

 

I am not a financial professional, so you realyl shuld seek the advice of one, but, if you do not want to be too active in the management, target date funds are an excellent way to have a blend of stocks, bonds and cash appropriate for your age and length of time until anticipated retirement.

 

I retire in 27 years. I have about 30-40% of my money in high risk. I just got to the point at my job where my company matches 75% (75 cents on the dollar) up to 9% of eligible earnings. I don't know how much of that match I want to lose and I was thinking on jumping out and then back in once it looks like things has turned around. The same thing happened from 2000-2003, it dropped quite a bit, but I rode that out and then it jumped back tremendously.

[dmarc117]

i have to agree with yo on this. in my 30s, this would seem like a great opp to put some money to work. they say you should buy things when they are on sale and these stocks are def on sale. but is there a clearance sale around the corner? who knows. im more in preservation mode currently. i dont need to get in at the bottom. i will let things settle down. and as ceo said, this economy is going anywhere anytime soon.

[Chavez]

i have to agree with yo on this. in my 30s, this would seem like a great opp to put some money to work. .

I thought you were 15?

 

I'm dumping the whole wad into ball bearings...it's all about the ball bearings these days.

[Puddy]

I retire in 27 years. I have about 30-40% of my money in high risk. I just got to the point at my job where my company matches 75% (75 cents on the dollar) up to 9% of eligible earnings. I don't know how much of that match I want to lose and I was thinking on jumping out and then back in once it looks like things has turned around. The same thing happened from 2000-2003, it dropped quite a bit, but I rode that out and then it jumped back tremendously.

With that time horizon there is no need to panic and move your money to safer assets. In fact, you should be 90-100% in high risk (assuming you mean the stock market is high risk) and hardly anything in safe, low return assets like bonds or cd's. Keep investing steady each month or paycheck. Trying to time the bear market and bull market is not the way to go. I can't remember the exact stat, but it was something crazy like if an investor happened to be 'out' of the stock market 10 specific dates over the last 20 or 30 years, their return was negligible in the market. Keep chuggin' along and worry about getting safer about 10 - 15 years from now.

[Double Agent]

Keep it where it is. Dollar cost average and keep throwing money at it. I'm in the same boat. I don't even look at it any more. I know it's in good funds and I still own the shares. Now I'm buying shares at a reduced rate. You have way too much time to panic. Keep investing.

[Outshined]

Thanks for the responses - I am going let it roll for a little while.

[Puddy]

Thanks for the responses - I am going let it roll for a decade or so.

Exactly

[TimC]

I'm 42 and I just bumped mine up all the way into higher risk. Ya know...buy low, sell high. Yeah right. I'm down 16% for the year, so what the hell. If the economy completely and totally tanks where we are burning our clothes to provide warmth, we'll have bigger problems than the 401(k). So I figure it'll turn around in the next 25 years or so or I'll use my torch to help me survive by eating my financial advisor's flesh. Either way, it's all good.

Edited September 25, 2008 by TimC

[dmarc117]

im going to use the pop we get from the rescue deal to get out of my positions. all cash for awhile. no need to pick the bottom.

 

disclaimer: im in a much different position than most people.

Edited September 25, 2008 by dmarc117

[Jimmy Neutron]

Manage your 401k portfolio carefully. Look at the details of what each fund invests in and stick with foreign stuff, utilities and energy. That's what I've done and I'm only down 1.8% YTD. Still sucks, but it beats being down 10-15% like so many others.

[i_am_the_swammi]

Isn't the money you are putting in now a good thing in that you are getting investments at a discount?

 

 

they say you should buy things when they are on sale and these stocks are def on sale.

 

 

Now I'm buying shares at a reduced rate. You have way too much time to panic. Keep investing.

 

Interesting thoughts, though tainted by this:

 

You all feel you are buying at a discount...a discount to what?

 

the reality it, like the housing bubble, many of the stocks/funds you bought over the last several years were inflated. You paid 130-150% of what they were actually worth, and now that the market is correcting, everyone thinks they are getting a discount. In reality, you are buying today at prices closer to what they are actually worth. What the fund managers aren't telling you is the purchases you made in 2004-2006 were grossly inflated, similar to the prices people paid for house some years ago.

 

I'd move your investments to a much safer house....as Jimmy said, utilities and energy stocks are much less volatile that those tied to the consumer-dependent part of the economy. Everyone uses utilities and energy...there is no way around it. Think about your everyday life...if money gets tight, you'll spend less on entertainment, clothes, dining out, travel, luxuries....but you'll always find the money to pay your electric bill and put gas in your car to get to work.

 

Just my opinion, of course, but if you are looking to hedge your investments with some degree of safety, these industries may be for you.

 

Good luck!

[Ursa Majoris]

Manage your 401k portfolio carefully. Look at the details of what each fund invests in and stick with foreign stuff, utilities and energy. That's what I've done and I'm only down 1.8% YTD. Still sucks, but it beats being down 10-15% like so many others.

Does that 1.8% include the money you've been putting in paycheck after paycheck? Whether or not, you've done quite well - most of us don't have broad enough 401k choices to be able to focus on single markets.

[CaP'N GRuNGe]

Manage your 401k portfolio carefully. Look at the details of what each fund invests in and stick with foreign stuff, utilities and energy. That's what I've done and I'm only down 1.8% YTD. Still sucks, but it beats being down 10-15% like so many others.

 

As of yesterday I was only down 21.1%. I wish I was down 10-15%. And one of my funds, FNORX (Fidelity Nordic Fund) is a foreign fund and it's down close to 30%.

Edited September 26, 2008 by CaP'N GRuNGe

[TheShiznit]

One suggestion may be to reallocate you current balance to a more conservative stance and allow you purchases to buy the higher risk stuff as it declines. There is no reason to allow your "lump" to lose while you dollar cost average your purchase payments. I am not saying this is what you should do, but if you are apprehensive about the next 6 months...what is wrong with taking your lump into the 2% and still buy the high risk stuff at a lower price. This back fires if the market takes off....which I don't see happening for the next 5 years or so.

[Jimmy Neutron]

As of yesterday I was only down 21.1%. I wish I was down 10-15%. And one of my funds, FNORX (Fidelity Nordic Fund) is a foreign fund and it's down close to 30%.

Did I forget to mention stay away from Europe? The foreign funds I have money in are focused on s america and asia pacific. It also helps that I've got 1/3 invested in company stock (healthcare) that has more than held its own.

 

Take a detailed look at each option you can invest in and don't be afraid to move money around, but stay diversified. Good luck. We're all going to need it.

[yo mama]

im going to use the pop we get from the rescue deal to get out of my positions. all cash for awhile. no need to pick the bottom.

Hope you followed through with that.

[BeeR]

With that time horizon there is no need to panic and move your money to safer assets. In fact, you should be 90-100% in high risk (assuming you mean the stock market is high risk) and hardly anything in safe, low return assets like bonds or cd's. Keep investing steady each month or paycheck. Trying to time the bear market and bull market is not the way to go. I can't remember the exact stat, but it was something crazy like if an investor happened to be 'out' of the stock market 10 specific dates over the last 20 or 30 years, their return was negligible in the market. Keep chuggin' along and worry about getting safer about 10 - 15 years from now.

 

Pretty much sums it up. Trying to get "cute" with this or that particular type of stocks/funds, or worse, trying to time the market, is much more likely to end up in you really getting hosed than doing really well.

 

Along with dollar-cost averaging and going for the long haul, I would add one last very general piece of advice: diversification is very important. ie don't put all your $ in foreign stocks or "specialty" or small cap (etc). This also helps minimize risk and counter-balance the highs and lows of any given sector or type.

 

You could also make a good case for index funds (funds which follow a large "swath" of the market, minimizing risk even more) but I haven't been able to bring myself to do it yet.

[tonorator]

The trick, I think, would be to gauge when the right time would be to get back into the market.

 

you are a regular norman einstein ... how long did it take you to come up with this?