401K question

[Cunning Runt]

I posted a while back admitting my lack of knowledge about the markets, etc...

 

People were reluctant to give opinions, and I respect that.

 

The question is still on my mind though so let me ask it in a way that takes opinions out of it.

 

Let's say in my mind that I'm convinced we're gonna see the market take a real dive (and I'm not quite there yet, but am taking a much more watchful eye). What sort of fund typically offered in a 401k family (not a specific name but a type), offers the most protection in the event of a market crash?

[geeteebee]

Cash. 100% cash.

[Cunning Runt]

Cash. 100% cash.

 

 

I'm pretty sure my 401k does not offer one that says "Cash". I'm telling ya, I'm a mental midget (ie a not-so Cunning Runt) on this stuff. What type of a fund family is closest to cash?

 

Money market? I honestly don't know.

[Big John]

I'm pretty sure my 401k does not offer one that says "Cash". I'm telling ya, I'm a mental midget (ie a not-so Cunning Runt) on this stuff. What type of a fund family is closest to cash?

 

Money market? I honestly don't know.

Money market or bonds are considered the most conservative 401k investments, so they would be the biggest protection.

[dmarc117]

money market....just see how it is insured cause some money markets lose too.

[Avernus]

if you're looking for a safe retirement option, I wouldn't narrow down my options to something where an organization has to hold my money....

 

I wouldn't say holding cash is good/bad - it's all on your perspective as to how things will shape up in the future...

 

most of my retirement consists of gold/silver and there are IRA options for this as well, I prefer the physical metal and have it stored away....but people tend to lump someone who invests in precious metals as a 'doom and gloomer'....but history states otherwise...

 

consider any option if you have no faith in the future markets and if you think it will crash then I would definitely hold physical gold/silver or even copper.....and some guns just in case the worst happens...

[TimC]

Yep, you basically get no return, but you don't lose any money either. I figure the downside is another 50% drop while the upside may be 5% tops. I'm not willing to risk another 50% drop again on the offchance I may miss that little 5% gain. For the last few months, that's where my money currently is in my 401(k) so I'm just treading water

until Pelosi is no longer Speaker of the House or Obama isn't President, whichever comes first

.

 

YMMV.

[geeteebee]

You most likely have a fund called 'stable value' which is a cash equivalent fund. It is probably filled with somekind of guaranteed investment contracts (where an insurance company promises to pay a certain rate for the use of your money). These funds are the safest funds traditionally offered in 401(k) accounts.

 

Bonds are the next safest, but if you are truly bearish, don't be fooled, they are not absolutely safe. Yields are currently very low (meaning prices are high) and some people believe in a equity market crash (and given the current state of our over levered economy) that bonds will not perform well either.

[dmarc117]

The latest anticipated weekly outflow from equity mutual funds just hit a one month high of $2.7 billion, as reported by ICI, and with that, YTD redemptions by equity investors have hit over $50 billion. Domestic equity mutual funds have not seen a net positive retail inflow since April 28, yet despite this the market has been substantially rangebound and until last week. What is notable is that even during times of relative stock outperformance, courtesy of whoever it is that is left buying stocks, be it HFT algos, or Primary Dealers pumped with cheap Fed liquidity (and don't forget today is another "free $2 billion courtesy of POMO" day), the investing public refuses to be drawn into owning stocks.

[Ursa Majoris]

, the investing public refuses to be drawn into owning stocks.

 

I'm still fully invested in stocks but I'm considering moving half my total 401k into a stable fund.

[Brentastic]

Cash. 100% cash.

This.^^^ - it’s also what I’ve been preaching on here for nearly a year.

 

Money market funds are no good because, again, if you see what’s going on globally – we are experiencing a deflationary depression. That means MASS defaults across the board. If sovereign governments can default (which they currently are) then you can bet your sweet a$$ that a bank holding your money market can and will default. And don’t believe the FDIC will protect you because they are in the red as well. Our system is crumbling at the seams and nobody is immune from the destruction except the Federal Reserve.

 

Bonds are no good either because they are someone else’s debt. Whomever the bond issuer is, they ower you for that debt. Again, we’re talking about global mass defaults so corporate bonds are at great risk of defaulting. Don’t own debt (bonds). US bonds, also risky but unfortunately the best option.

 

Your 401k won’t offer a cash fund so you will need to research what funds have the highest allocation into cash and cash equivalents. Cash equivalents will be US government securities (tbills and bonds), the lower the term the safer (but also the lowest yield). Keep in mind though, the US government is only perceived as safe but they can default too so this may only be a short-term safe haven.

 

I personally don’t recommend buying gold, although a small allocation into buying actual gold (not gold funds) is probably a nice hedge on cash.

 

Bottom line – get out of equities (stocks) YESTERDAY and get heavy into cash. I’ve remained consistent with this advice since January and I stick with it.

[Brentastic]

Let me just reiterate why you should not do a money market. Not only are they not as safe as perceived, they offer no return and your money is locked for a set amount of time. At least with a government security you get a better yield and can always sell in the open market to cash out before maturity.

 

And the big RED FLAG regarding mm funds is the new rule passed by the SEC back in January that allows the funds to prohibit redemptions in times of duress. A fund can now prevent people from taking their money outif three conditions are fulfilled:

 

• The fund’s share price falls below the fund’s stable net asset value per share.

 

• The fund’s board of directors approves liquidation of the fund.

 

• The fund notifies the SEC of its decision to liquidate and suspend redemptions.

[MikesVikes]

In my family of mutual funds the safe option is called Money Market fund.

 

Here is what the prospectus says: The fund invests substantially in U.S. Treasury securities and other securities

backed by the full faith and credit of the U.S. government, as well as securities issued by U.S. federal agencies.

The fund may also invest in other high-quality money market instruments.

 

No, you won't be making any money on the return. But on the bright side, you won't be losing money as you predict, while

others are losing theirs in the riskier funds.

 

No, there's no such fund called cash. Don't ask for a full distribution of your account just because some dude from the Huddle

says that you shouldn't invest in a money market account because the market is going to take a historical crash.

 

Also, the 401k representative probably makes very little or no commission if your money is in a money market account. He will

probably advise you to keep playing the markets.

[Brentastic]

In my family of mutual funds the safe option is called Money Market fund.

 

Here is what the prospectus says: The fund invests substantially in U.S. Treasury securities and other securities

backed by the full faith and credit of the U.S. government, as well as securities issued by U.S. federal agencies.

The fund may also invest in other high-quality money market instruments.

 

No, you won't be making any money on the return. But on the bright side, you won't be losing money as you predict, while

others are losing theirs in the riskier funds.

 

No, there's no such fund called cash. Don't ask for a full distribution of your account just because some dude from the Huddle

says that you shouldn't invest in a money market account because the market is going to take a historical crash.

 

Also, the 401k representative probably makes very little or no commission if your money is in a money market account. He will

probably advise you to keep playing the markets.

This is the only type of money market fund you should invest in.

[CaP'N GRuNGe]

Mine and my wife's are both in:

 

Fidelity Cash Reserves (FDRXX) (Though I recently took out a substantial amount from mine as a 5 year loan to help purchase our home.)

 

Overview

What it is

A money market mutual fund.

 

Goal

Seeks to provide as high a level of current income as is consistent with the preservation of capital and liquidity.

 

What it invests in

Primarily invests in U.S. dollar-denominated money market securities, including U.S. Government securities, and repurchase agreements, and enters into reverse repurchase agreements. The fund invests more than 25% of its assets in the financial services industry. An investment in this portfolio is not guaranteed or insured by the FDIC or any other government agency. Although this money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in this fund. Yield will vary.

 

Who might want to invest in it

• Someone with an aggressive portfolio who wants to help balance his or her overall investment strategy.

• Someone who may need to use this portion of his or her money soon (for retirement income, for example), and who is looking for the value of his or her investment to stay stable.

 

 

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Fund Manager - Robert Litterst

 

Board of Trustees