401ks?

[Ursa Majoris]

IMO, if you take what is left right now and move it into something more safer.... You are just guaranteeing you will lose money. You are making the recent losses permanent.

That's the point right there. You've taken a loss so if you're not continuing to invest (and even if you do time a rebound correctly) you will lock in the loss.

[Double Agent]

The wife and I are dumping as much money as we can into her 401k.

[Yukon Cornelius]

I am contributing as usual, but my employer is no longer doing their matching.

them CEO's gotta eat 2.

[rocknrobn26]

Guys...those are classic investment mistakes. You already took a beating. Don't miss out on the upswing. Trying to time the market is a poor strategy (especially for you Kevin given your age). Sure it may go lower. But nobody knows. That's why you should invest in regular intervals. Take advantage of the cost averaging.

 

RR - if you aren't counting on that money in the near future don't go to fixed yet. We aren't smart enough to time the market (well at least I'm not).

 

Believe me Pud, this was not a knee jerk reaction. And your advice is sound. My situation is a bit different from yall. At my age, I can't wait 10+ years for this market to be back where it was. 4%-5% right now, guaranteed, looks a lot better than the prospectus' Ive been looking at especially considering there are some very fat years included. Those of you who are younger can wait. Add to that a very nervous wife who saw 10 years of gains lost in the last year, plus principle. The gains loss I could live with, but when she/we saw over 30% of the principle gone we freaked out. Add to that even if the market turned around tomorrow and started returning 10%, it would take a long time just to get the principle back. Time is my issue.

I still have a couple that I haven't pulled the pin on yet....trying to decide.

[TimC]

Plugging along same ole, same ole. I've got at least 25 years before I see a nickel.

 

I wish I'd just pulled it all out and taken the tax and penalty hit now though.

 

I don't blame rr at all for his strategy. I think this will be more like the 1930's where it was until the 1950's when you finally "made your money back" and land prices in 1928 took until well into the 1960's to return to that price. I'm a firm believer that China will crush our economy if given the chance (even at the risk of their own). The Chinese economists are not backwards Commies, they are savvy and very intelligent. Hope I'm wrong, but if I were 61 instead of 41, I'd be careful.

[CowboysDiehard]

I'll comment. Also, I admit I am no expert in these matters.

 

In April, I moved my 401k balance into a zero yield account...basically a bond account. My employer matched my contributions up to 6%, and I did not want to lose that. I considered my employer matching contribution to be my "return on investment" if you will--and I did not want to lose these matching funds. I am currently vested 20% in the match, in a few months it will be 60%.

 

Now, I had another 401k from another employer. I rolled the full amount into a traditional IRA about 8 months ago. I have it in a moderate risk fund. It has lost 50% of it's value. Nonetheless, I am 'letting it ride' so to speak.

 

Bottom line. The rollover IRA account and the current 401k (that isn't invested at the moment) are today EQUAL in value. I spent seven years contributing to the account that became the IRA, and only a little over a year contributing to my current 401k (Granted, the employer matched portion of the 401k isn't fully vested yet, I am about a year and a half away from that being the case). So, yes, stuffing my retirement into a pickle jar and burying in the yard so to speak is paying off at the moment.

 

Yesterday, my employer announced three things. They were no longer matching the 401k contributions, they were no longer offering discounted stock options, and they were cutting all salaries by 5% (and even more for managers and execs). They claim to be doing this in lieu of laying off 20,000 employees. There were no promises that any of these things would be reinstated. I can be a cynic at times, however, I understand why this needs to be done, and I am glad to work for an organization that views their employees as assets, rather than as numbers to be slashed. This isn't to say that more (there have been some) layoffs is not a possibility, but we all live with that these days.

 

So, yes, I am contributing to my 401k, but am not investing at the moment. I have my IRA invested, but am considering sheltering what I have left in as conservative a fund as I can find. Given the irresponsible rhetoric of the past year regarding our economy, and the government's recent actions which will hike our national debt, I do not see an upswing anytime soon. I am sitting it out for now. Once I see employment numbers start to improve (and this will not happen anytime soon, regardless of the stimulus), then I'll change my strategy.

 

Just my two cents from where I sit.

Edited February 19, 2009 by CowboysDiehard

[CowboysDiehard]

I wish I'd just pulled it all out and taken the tax and penalty hit now though.

 

No doubt, dude, I kinda wished I had done the same, or at least once I rolled my old account over let the money sit in the cash acct it was in...

[Pope Flick]

Anyone's take on % to put 401K contributions into bonds? It seems like it makes loss less likely but bonds are such crap right now would it serve as deadweight once/if the market begins to recover?

 

I've got about a week and a half to decide. 'Aggresive' mixes have less than 10% bonds. What kind of risk would 0% entail these days?

[i_am_the_swammi]

But eventually it all came back. The same is going to happen this time, just not as fast. This one may take 5 years to recoup, but it will eventually come back.

 

Sorry JoJo, but your thinking is a little off.

 

Like real estate, many company's stocks were artificially higher, due to a variety of circumstances: more money flowing into the market, irrational exuberance, etc. People were buying stocks at riduclous PEs, and still making money. Sadly, many people continued to invest (or dollar-cost average) all the way down the slope allowing those that bought high to sell to someone who was thinking "its a good idea to dollar cost average". Now you are stuck with their shares.

 

Think about many of the companies you know and may love: Sirius, Six Flags, Circuit City....their stocks took a beating over the last 36 months, and people employing "dollar-cost averaging" were the poor investors that bought those worthless shares all the way down to basically zero. This is a perfect example of "throwing bad money after bad money"...the worst kind of mistake you can make.

 

The reality is that the market rose at unprecendented levels over the last several years, and became over-inflated. This correction is just that...a correction. But don't think that the prices will automatically rebound to prior high's because they won't. The prices you see now are more in line with reality than the prices of 2004 were.

 

Additionally, many believe in the theory that this generation of investor has been burned, and is not likely to return anytime soon. Many of the preceding posts in this thread are classic examples of what millions of Americans of this generation are thinking..."I got used to double-digit returns for many years, got burned, and gave it all back....that won't happen again. I'll take my fixed-single-digit return each and every year and plan for my retirement that way." With less investors (and less money) in the market, prices will likely be slow to rise for many, many years. While I do think we'll see a "pop" at some point (perhaps a 10-15% incease in the market) that quasi-corrects the over-selling, the ongoing appreciation will be much less than in year's past.

 

Finally, the thinking that "if I sell now, I am locking in my losses" is totally backward. History means nothing in terms of your future gains or losses. You should invest in what you think has the best chance to earn you the highest returns going forward. If that means selling what you own at a loss and re-investing in a different class, than so be it. Investing is a forward-thinking strategy. Holding onto a poor performer because you are already down is a classic investing mistake.

[Avernus]

Sorry JoJo, but your thinking is a little off.

 

Like real estate, many company's stocks were artificially higher, due to a variety of circumstances: more money flowing into the market, irrational exuberance, etc. People were buying stocks at riduclous PEs, and still making money. Sadly, many people continued to invest (or dollar-cost average) all the way down the slope allowing those that bought high to sell to someone who was thinking "its a good idea to dollar cost average". Now you are stuck with their shares.

 

Think about many of the companies you know and may love: Sirius, Six Flags, Circuit City....their stocks took a beating over the last 36 months, and people employing "dollar-cost averaging" were the poor investors that bought those worthless shares all the way down to basically zero. This is a perfect example of "throwing bad money after bad money"...the worst kind of mistake you can make.

 

The reality is that the market rose at unprecendented levels over the last several years, and became over-inflated. This correction is just that...a correction. But don't think that the prices will automatically rebound to prior high's because they won't. The prices you see now are more in line with reality than the prices of 2004 were.

 

Additionally, many believe in the theory that this generation of investor has been burned, and is not likely to return anytime soon. Many of the preceding posts in this thread are classic examples of what millions of Americans of this generation are thinking..."I got used to double-digit returns for many years, got burned, and gave it all back....that won't happen again. I'll take my fixed-single-digit return each and every year and plan for my retirement that way." With less investors (and less money) in the market, prices will likely be slow to rise for many, many years. While I do think we'll see a "pop" at some point (perhaps a 10-15% incease in the market) that quasi-corrects the over-selling, the ongoing appreciation will be much less than in year's past.

 

Finally, the thinking that "if I sell now, I am locking in my losses" is totally backward. History means nothing in terms of your future gains or losses. You should invest in what you think has the best chance to earn you the highest returns going forward. If that means selling what you own at a loss and re-investing in a different class, than so be it. Investing is a forward-thinking strategy. Holding onto a poor performer because you are already down is a classic investing mistake.

 

 

well said...

[JoJoTheWebToedBoy]

There is some truth to what you say, individual stocks are much riskier IMO the a good Mutual Fund, a little less danger of them going under like say a Circuit City. And yep, I know we won't be seeing the kind of growth we had been... But I still believe that in 5-10 years from now, what I lost will eventually come back.

[MikesVikes]

I'm still plugging my coin into the machine. My apologies for not losing 30% like I was supposed to.

Edited February 19, 2009 by MikesVikes

[MikesVikes]

Anyone's take on % to put 401K contributions into bonds? It seems like it makes loss less likely but bonds are such crap right now would it serve as deadweight once/if the market begins to recover?

 

I've got about a week and a half to decide. 'Aggresive' mixes have less than 10% bonds. What kind of risk would 0% entail these days?

 

You can ask 30 people and get 30 different answers. You may get 30 correct answers as well. Everyone has a different risk tolerance.

[Big Country]

Anyone's take on % to put 401K contributions into bonds? It seems like it makes loss less likely but bonds are such crap right now would it serve as deadweight once/if the market begins to recover?

 

I've got about a week and a half to decide. 'Aggresive' mixes have less than 10% bonds. What kind of risk would 0% entail these days?

 

 

Rule of thumb I have heard several times over for a simple method is that the mix is to basically put your age into bonds.. so if you are 30, a mix of 30% bonds and 70% stocks is a general rule of thumb. I'm not ure if that holds true or ever was very good advice, but it was a general rule I had read that essentially decreased risk as retirement got closer.

 

But, I would defer to the more financially savvy to comment on this and other ideas.

 

Me personally, I am 31, and am contributing 24% to bond funds, 10% to a fixed income money market which basically makes nothing and the rest into a diversified group of mutual funds ranging from large cap US, mid cap US, small cap US, international markets, emerging markets and a couple of specialty funds.

 

On the year I am down about 4%.

 

I'm still contributing and taking advantage of my employer match, and will be meeting with my financial advisor soon to review and modify if necessary the allocations/fund choices in my 401K, Roth IRA (me and my wife's) and our regular accounts.

[CaP'N GRuNGe]

I am sitting it out for now. Once I see employment numbers start to improve (and this will not happen anytime soon, regardless of the stimulus), then I'll change my strategy.

 

Just my two cents from where I sit.

 

I'm no expert either, but i've heard it mentioned that stock market recoveries always happen before the economy starts to come back to life. If you wait until you see GDP or employment numbers increasing, it may be to late to participate in the market bounce. The market is forward looking and prices reflect the future. Something like that.

[dmarc117]

its a trading market these days....not a buy and hold imo. we will have rallies, some very sharp. i'd stay away from banks and any financials with this nationalization thing going around. equity holders would get the short end o the stick.

[Ursa Majoris]

I'm no expert either, but i've heard it mentioned that stock market recoveries always happen before the economy starts to come back to life. If you wait until you see GDP or employment numbers increasing, it may be to late to participate in the market bounce. The market is forward looking and prices reflect the future. Something like that.

I heard that if you miss just five days of a market bounce, you'll forfeit half the overall gains. I guess it's really just a case of wait and see for everyone because although we're all pontificating away here, none of us really has a clue.

[Clubfoothead]

Lost too much recently to give even more back in tax penalties. I still get an employer match and it seems to have stabalized although at about 2/3 the value it was in August.

[cre8tiff]

Lost too much recently to give even more back in tax penalties. I still get an employer match and it seems to have stabalized although at about 2/3 the value it was in August.

 

+1 I may up my contribution next month, though.

[CaP'N GRuNGe]

I'm split 4 ways among the following:

 

http://finance.yahoo.com/q/cq?d=v1&s=f...ntx+fdfax+ffnox

 

Canada as my foreign fund.

Contrafund as my large US companies type fund.

Consumer staples because from my understanding they are a defensive fund in economic downturns.

Fidelity Four-in-One Index fund. A co-worker suggested it.

 

 

Overall mix:

 

57.78% domestic equities

34.32% foreign equities

2.71% bonds

5.05% short term

.14% other

 

I'm sure I have a good amount of financials in the Contrafund and the FFNOX fund. I do have a pretty large (probably around 25% of holdings) of financials in the Canada fund. But my understanding is their banks weren't engaging in all the risky crap we were.

 

If anyone has any investment mix advice, I'm all ears. I'm 35 and my wife is 32 so we have a long ways to go. She's in the same funds as I am as we have the same employer and it was just easier to keep the same mix. At least we still get up to 4% matching...for now.

[muck]

Generally, I am preferring to be a bond holder than a stockholder right now.

 

That said, I think that owning the debt and preferred (but not common) equity in banks is a relatively good idea right now (avoid Citibank though, imo).

[muck]

Based on reading this thread, it appears to me that nobody hear has read either of the two books I've suggested for several years for you guys to read...

 

Fooled by Randomness

and

Black Swan

 

...both by Nassim Taleb...

[Pope Flick]

Based on reading this thread, it appears to me that nobody hear has read either of the two books I've suggested for several years for you guys to read...

 

Fooled by Randomness

and

Black Swan

 

...both by Nassim Taleb...

 

 

Cliff Notes?

[dmarc117]

Cliff Notes?

 

 

its better to be lucky than good

[muck]

Cliff Notes?

 

NOTE: Black Swan is sort of a sequel to Fooled by Randomness... From the reviewers at Amazon.com:

 

Fooled by Randomness:

"If the prescriptions for getting rich that are outlined in books such as The Millionaire Next Door and Rich Dad Poor Dad are successful enough to make the books bestsellers, then one must ask, Why aren't there more millionaires? In Fooled by Randomness, Nassim Nicholas Taleb, a professional trader and mathematics professor, examines what randomness means in business and in life and why human beings are so prone to mistake dumb luck for consummate skill. This eccentric and highly personal exploration of the nature of randomness meanders from the court of Croesus and trading rooms in New York and London to Russian roulette, Monte Carlo engines, and the philosophy of Karl Popper. Part of what makes this book so good is Taleb's ability to make seemingly arcane mathematical concepts (at least to this reviewer) entirely relevant in evaluating and understanding everything from the stock market to the success of those millionaires cited in the aforementioned bestsellers. Here's an articulate, wise, and humorous meditation on the nature of success and failure that anyone who wants a little more of the former would do well to consider."

 

Black Swan:

"Taleb has one good idea, a great idea even, and an infinite number of ways of talking about it. It is essentially the same idea as his last book, Fooled by Randomness: namely that life does not behave with regularity. Those who think it does, he says, will always be tripped up by the unexpected. Black Swan extends that idea, beyond the financial markets he concentrated on in Randomness, to just about all walks of life. He is a magpie for anecdote and stray pieces of supporting evidence wherever he can find them. He calls all this 'skeptical empiricism'. The qualification is that his big idea is not original, though his numerous examples do help bring home its ubiquity. More problematically, he overstates its usefulness. For when it comes to calling your next move, the unpredictable and the unexpected are, by definition, not things we can anticipate. And though he is right that in the long run there will undoubtedly by high impact improbably events, it is also true, as Keynes said, that in the long run we are all dead: organising your life on the principle that something radical might come along doesn't solve the everyday problem of what to next. In short, he exaggerates his own insight and the authority it gives him. That's a wicked irony, for the chief target of his ire is those with an exaggerated sense of insight and control over their lives. Oh, and the tone... Taleb wants to be seen as a radical iconoclast. Every sentence drips righteousness and often irritation. He is the strutting, impatient sage, the rest of us blinkered morons. Apparently he doesn't like his editors trying to change this. A word of advice to the author: if you want your advice heeded, don't shout and sneer at your audience. For this reason, an interesting thesis, but in the end a wearisome read."

 

...........................

 

Obviously I disagree with some of these assessments, but, he is definately a bit high-and-mighty in his prose. A friend of mine who read FbR told me, "Hey, this guy is making fun of me..." ... and he then followed it up with ... "...but I definately deserved it."