A thread for us 401k people that don't know the markets per se

[Cunning Runt]

I'm the first to admit I don't know much about the markets and even what type of funds I want my 401k money to be in during different market conditions.

 

What I do know is that I contribute the max and am counting on that money for my retirement. I do think we're headed for a market that is going to lose a lot of value - how much remains to be seen. And I, like many, want to cover my ass as much as I can.

 

I'm looking for some intelligent and open discussion (and frankly some advice) on what someone like me should be doing with his 401k to protect himself as much as possible.

 

Here are my current allocations for those of you who know funds:

 

Wells Fargo Stable Return G: 10% - Money Market/Stable Fund

T. Rowe Price Retirement 2030 Adv: 60% - Target Maturity Fund

T. Rowe Price Retirement 2040 Adv: 20% - Target Maturity Fund

Thornburg Intl Value R/5: 10% - International Stock Fund

 

I honestly have no idea if this a good distribution of my monies or not for what may be coming. Comments?

 

Seriously - I'm concerned and it would seem a good number of you understand this stuff way better than I do.

 

TIA.

[Cunning Runt]

This one's slipping fast with no response. I figured all the smart money people woulda chimed in.

[yo mama]

I don't think anyone wants to take responsibility for giving you advice that turns out to be wrong.

 

But if I were you, I'd considering putting at least some portion of your portfolio into bonds. Many bond funds are doing rather well right now (6%-8% annually) and have less risk than equity funds. (But they're not "risk free"). 10% in money market is very conservative, and doesn't strike me as a good idea UNLESS you're betting on the downfall of the American economy ( ) or you're older and want maximum downside protection for your capital.

 

But we're also in a very schizophrenic economy right now with various nonsensical economic indicators going in different directions (a jobless economic recovery, artificially low interest rates, and rising corporate profits despite growing unemployment, to name a few). So betting which way the wind is going to blow next is virtually impossible.

 

Frankly, the best thing you can do is keep maxing out your 401k and keep working for as long as you can. You age/retirement horizon has a lot to do with your optimal investment mix; your tolerance for risk is another factor. And without knowing what your available investment alternatives are, I don't think anyone can really give you intelligent advice in the first place.

[jetsfan]

This one's slipping fast with no response. I figured all the smart money people woulda chimed in.

 

I am not a smart money person, but I will chime in anyway. I am 38 and do not plan to retire for another 20+ years. Therefore, I have kept my 401k in the same allocations over the last couple of years with the assumption that I will be dollar cost averaging.

50% Eur-Asia

30% US small cap

20% S&P 500

 

Having my 401k with fedgov, I don't have very many fund choices. Plus, I don't plan to touch the money for a couple decades, therefore, I went with the most aggressive stance I felt I should take.

[dmarc117]

im not smart. im a bear. there is too much uncertainty in the world today for me. i own some gold, silver, and shrt term govt. rest is cash. i may miss some upside, but im not losing anything either. my situation is different tho. i trade for a living so both my retirement and daily income are based on the markets. there are far smarter people than me out there.

 

and i read sh1t like this all day.......

 

http://seekingalpha.com/article/216981-8-m...e-dip-is-coming

Edited July 28, 2010 by dmarc117

[polksalet]

50% in a 2035 fund

25% in a bargain fund

!2.5% russell 200 index

12.5% S&P index

 

I think mine is pretty much identical to yours.

[Cunning Runt]

I don't think anyone wants to take responsibility for giving you advice that turns out to be wrong.

 

But if I were you, I'd considering putting at least some portion of your portfolio into bonds. Many bond funds are doing rather well right now (6%-8% annually) and have less risk than equity funds. (But they're not "risk free"). 10% in money market is very conservative, and doesn't strike me as a good idea UNLESS you're betting on the downfall of the American economy ( ) or you're older and want maximum downside protection for your capital.

 

But we're also in a very schizophrenic economy right now with various nonsensical economic indicators going in different directions (a jobless economic recovery, artificially low interest rates, and rising corporate profits despite growing unemployment, to name a few). So betting which way the wind is going to blow next is virtually impossible.

 

Frankly, the best thing you can do is keep maxing out your 401k and keep working for as long as you can. You age/retirement horizon has a lot to do with your optimal investment mix; your tolerance for risk is another factor. And without knowing what your available investment alternatives are, I don't think anyone can really give you intelligent advice in the first place.

 

 

Thanks. I wasn't looking to hold anyone accountable. I realize any decision I make is mine alone. Consider this "research". Figure my investment options as your typical family of funds.

[Puddy]

If you plan on retiring in 2030 then why not put 100% of the investment in the target 2030 fund? Those funds are designed to reallocate the investments over time. If you invest portions in other funds you are probably undermining the intent of the target fund.

[polksalet]

If you plan on retiring in 2030 then why not put 100% of the investment in the target 2030 fund? Those funds are designed to reallocate the investments over time. If you invest portions in other funds you are probably undermining the intent of the target fund.

 

because as the funds go on they become more conservative. I'm not looking to be that conservative, yet. I just moved my stuff from 2050 to 2030. That's the most conservative move I've made in a long time.

[Azazello1313]

it looks like your allocation is pretty balanced for your target retirement date. I'd just keep things where they're at and hope for the best. trying to outthink the market usually gets you nowhere.

[Avernus]

im not smart. im a bear. there is too much uncertainty in the world today for me. i own some gold, silver, and shrt term govt. rest is cash. i may miss some upside, but im not losing anything either. my situation is different tho. i trade for a living so both my retirement and daily income are based on the markets. there are far smarter people than me out there.

 

and i read sh1t like this all day.......

 

http://seekingalpha.com/article/216981-8-m...e-dip-is-coming

 

 

exactly....I follow almost the same position as you, but won't tell you any different because I'm no genius when it comes to this stuff...I just don't like what I'm seeing so the market has made me a bear until further notice...

 

and I am always reading articles like the one you posted or watching YouTube channels that have the same tone.....and also an occasional clip on people who are optimistic just to see if I am missing something - but almost every time I end up completely disagreeing with their "logic"....I could either be way off, or not....I just go with what makes sense for me right now...

 

I also would like to 2nd what Yo Mama said about not wanting to give you advice that isn't very good....all I will do is talk about my position to see if anyone agrees/disagrees with me to get an outside opinion....and then see if they offered me another perspective that I can use....pretty much what I do on the Fantasy Forum in your usual debate I might take part in...or not...

[Sugar Magnolia]

It would be easier to comment if I knew the distribution of your non-retirement assets.

[Puddy]

because as the funds go on they become more conservative. I'm not looking to be that conservative, yet. I just moved my stuff from 2050 to 2030. That's the most conservative move I've made in a long time.

Well if that's too conservative then you move your target fund further out. I guess I just don't understand why amateur investors try to outthink professionals and try to beat the market. People's entire job is to diversify properly based on our comfort level with risk. If I'm going to be 60 in 2030 and want to be 'normally' risky then I invest everything in funds that are targeted for that retirement age. If I'm less risk averse maybe I invest in a 2040 target fund.

[polksalet]

Well if that's too conservative then you move your target fund further out. I guess I just don't understand why amateur investors try to outthink professionals and try to beat the market. People's entire job is to diversify properly based on our comfort level with risk. If I'm going to be 60 in 2030 and want to be 'normally' risky then I invest everything in funds that are targeted for that retirement age. If I'm less risk averse maybe I invest in a 2040 target fund.

 

Because the only investment guy I trust is Muck. I don't even trust the guys on Wall St. to run an index fund correctly.

[CaP'N GRuNGe]

I pulled it all out on the day of the flash crash. Was going to pull it out the day before but didn't push the button. So all in money market at the moment (and a loan taken out to help purchase a home). The market (DOW) is about where it was when I pulled over to the sidelines. I'm basically flat on the year. I've been watching it go up and down and I too think we're in for a pretty large drop, though the past gains have made me rethink that a bit.

 

I'm just trying to figure out when to move back in and then of course what my mix should be too. I've probably got 30 years to retirement. It's hard to have your money sitting there losing value but its also hard to feel like you aren't participating. I've never put any of my money into bonds. I just have never taken the time to really understand them. The looming threat of inflation that everyone is always buzzing about has also kept me away.

Edited July 29, 2010 by CaP'N GRuNGe

[polksalet]

I pulled it all out on the day of the flash crash. Was going to pull it out the day before but didn't push the button. So all in money market at the moment (and a loan taken out to help purchase a home). The market (DOW) is about where it was when I pulled over to the sidelines. I'm basically flat on the year. I've been watching it go up and down and I too think we're in for a pretty large drop, though the past gains have made me rethink that a bit.

 

I'm just trying to figure out when to move back in and then of course what my mix should be too. I've probably got 30 years to retirement. It's hard to have your money sitting there losing value but its also hard to feel like you aren't participating. I've never put any of my money into bonds. I just have never taken the time to really understand them. The looming threat of inflation that everyone is always buzzing about has also kept me away.

 

I honestly have little idea what I am doing. Everyone I had listened to for years turned out to be criminals and thieves. Now I'm just hanging out throwing money into the belly of the beast.

[Cunning Runt]

I honestly have little idea what I am doing. Everyone I had listened to for years turned out to be criminals and thieves. Now I'm just hanging out throwing money into the belly of the beast.

 

You just described me.

 

Sucks doesn't it?

 

I know how to earn a paycheck, but honestly don't know what the best way is to protect that money.

[Ursa Majoris]

It's likely today will be a big gain based on pre-bell trading because of the latest data from Europe.

 

 

Maybe.

[dmarc117]

one more thing from a dumb person.......

 

i think the current stock market is not a very good indicator of the overall economy.

[The Irish Doggy]

I have a very pessimistic view of managed funds in general. Fees are high and research shows that over time they don't beat the market. If one isn't going to actively manage their retirement accounts, I vastly prefer ETF/index funds going heavy on stocks (I'm 80/20 stocks/bonds right now) if you won't be retiring for 20+ years. I think its too easy to get caught worrying about the headline du jour vs. the long term strategy.

[CaP'N GRuNGe]

It's likely today will be a big gain based on pre-bell trading because of the latest data from Europe.

 

 

Maybe.

 

Doesn't look like it.

[polksalet]

I have a very pessimistic view of managed funds in general. Fees are high and research shows that over time they don't beat the market. If one isn't going to actively manage their retirement accounts, I vastly prefer ETF/index funds going heavy on stocks (I'm 80/20 stocks/bonds right now) if you won't be retiring for 20+ years. I think its too easy to get caught worrying about the headline du jour vs. the long term strategy.

 

this too, another reason im heavy into index funds

[Brentastic]

Any fund invested in equities (stocks) is a bad play right now. Cash equivalents is what you want your 401k allocated into. That would be the funds with the heaviest allocation in Tbills or Tbonds. Avoid money market funds, municipal bonds and corporate bonds. The only safe money market funds are those invested in treasury securities.

[polksalet]

Any fund invested in equities (stocks) is a bad play right now. Cash equivalents is what you want your 401k allocated into. That would be the funds with the heaviest allocation in Tbills or Tbonds. Avoid money market funds, municipal bonds and corporate bonds. The only safe money market funds are those invested in treasury securities.

 

What do you base this on?

[Brentastic]

What do you base this on?

On the fact that we are in a deflationary depression. Cash will be king in this environment. When defaults are abundant, people won't care about gold or silver, they will want cash.