What's the right thing to do with 401 savings?

[Vlad_the_Impaler]

My 401 is now down 19% YTD. I'm starting to think about moving just about all of it to a fixed rate (safe) option, just to ride out the storm, and then jumping back into equities when the worst of the storm is over. But a little voice inside my head keeps telling me not to do it.

Given that I don't need the savings for another 18 years or so, what do you experts think?

[AvgMSUJoe]

The market can turn on a dime... If you pull out now, you know, that week will start the "turn around" and you will have to buy back in at a higher price.

If you aren't retiring in the next 10 years... I think the best advice is to NOT look at your 410k balance for a year.

But I know nothing... cause I was going to go the fixed route last november, but didn't.

[TheDoctorIsIn]

If you're staying in for a while, it may not be a bad time to buy more. If nothing else, I say leave it alone. But, I'm no expert.

[ninowesco]

the worst of the storm is over

you're about a year late

[Vlad_the_Impaler]

Originally Posted by ninowesco

the worst of the storm is over

Is it really? I keep telling myself that, and yet it keeps getting worse.

[SBSpartan]

Originally Posted by Vlad_the_Impaler

Is it really? I keep telling myself that, and yet it keeps getting worse.

Everything I am told is to stick it out if you are young. All you are doing is buying a lot of cheap shares right now. Bailing out would make it so you couldn't capitalize on the market when it turns up.

What I was told to do is keep my investments and if I felt like it move a bigger percent away from stock funds.

I decided to stay with what I have only because I have 30+ years left to invest.

[ninowesco]

Originally Posted by Vlad_the_Impaler

Is it really? I keep telling myself that, and yet it keeps getting worse.

well, there may be some more bad stuff left but it's already gone to low to sell out now

isn't selling low one of the things they tell you not to do

[negreen]

Market does not even compensate for inflation for last 10 years.

Without serious reform, stock market will be nothing but ATM for insiders.

Originally Posted by AvgMSUJoe

The market can turn on a dime... If you pull out now, you know, that week will start the "turn around" and you will have to buy back in at a higher price.

If you aren't retiring in the next 10 years... I think the best advice is to NOT look at your 410k balance for a year.

But I know nothing... cause I was going to go the fixed route last november, but didn't.

[RH Spartan]

Originally Posted by Vlad_the_Impaler

My 401 is now down 19% YTD. I'm starting to think about moving just about all of it to a fixed rate (safe) option, just to ride out the storm, and then jumping back into equities when the worst of the storm is over. But a little voice inside my head keeps telling me not to do it.

Given that I don't need the savings for another 18 years or so, what do you experts think?

Got you beat - down 22% YTD!

Stay in equities. I'm moving more to international funds, as I think the fundamentals of the US economy will stunt growth in the medium term, but staying in equities.

If you are really that worried about it, talk to an advisor. Just remember that they aren't portfolio managers, but advisors. You can always tell them to go to hell.

[Toolman]

Put some in a fixed rate IRA, safe is not bad right now and this is not getting better for a year or two. Then maybe do some "safe" muni-bonds. At least the government bonds will just raise taxes. One thing to think about is that the value of the dollar is going to go down with the increased spending the next president will do.

[Fletch]

1. I've got you beat - down 22% YTD.

2. If you don't need it for 18 years DON'T TOUCH IT. Move it now and you're selling at what will likely be its lowest point over the next 18 years. How smart is that?

[Cuchulainn]

Originally Posted by RH Spartan

Got you beat - down 22% YTD!

Stay in equities. I'm moving more to international funds, as I think the fundamentals of the US economy will stunt growth in the medium term, but staying in equities.

If you are really that worried about it, talk to an advisor. Just remember that they aren't portfolio managers, but advisors. You can always tell them to go to hell.

Careful about international investing. A lot of the emerging markets (Asia, Europe and Russia) are taking an absolute pounding. The credit crunch has spread to other parts of the globe and I suspect that it will hit Europe harder than the US. Their central bank is relatively weak and does not have the tools to deal with the crisis.

[RH Spartan]

Originally Posted by Cuchulainn

Careful about international investing. A lot of the emerging markets (Asia, Europe and Russia) are taking an absolute pounding. The credit crunch has spread to other parts of the globe and I suspect that it will hit Europe harder than the US. Their central bank is relatively weak and does not have the tools to deal with the crisis.

For sure. I invest in mainly Euro/Aspac fund with a heavy focus in Japan, Korea, Thailand, Australia, etc. Can't stomach investing in Vietnam, China, etc. While they are risky, I am of the opinion that they will have better growth prospects than the US in the next 10 years. I'm also investing in alt energy funds (which are heavily international as well) and small cap funds. Of course, my performance has been downright rotten lately......

[Nommad]

[Tom Hagen]

I don't ever look at my 401(K) or Roth balances.....why depress myself. However, increased my contribution to my 401(K) to a ridiculous level within the past 3 months.....so hopefully it will work out.

[Rashomon]

Originally Posted by Vlad_the_Impaler

My 401 is now down 19% YTD. I'm starting to think about moving just about all of it to a fixed rate (safe) option, just to ride out the storm, and then jumping back into equities when the worst of the storm is over. But a little voice inside my head keeps telling me not to do it.

Given that I don't need the savings for another 18 years or so, what do you experts think?

It's buy low, sell high.. not the other way around. Don't move your money now! In fact, you should be getting ready to BUY!

[chachi]

Double down or cash out and get a hooker.

[Golfnut]

take it all out and put it in the safest place possible. The free market will take care of itself in time.

[SBSpartan]

Originally Posted by Rashomon

It's buy low, sell high.. not the other way around. Don't move your money now! In fact, you should be getting ready to BUY!

I totally agree. Most of us are younger and can benefit from this mess later in life. I am loving my company match right now. Nothing like a **** load of bonus shares at the end of the year.

[Feckweed]

Originally Posted by Vlad_the_Impaler

My 401 is now down 19% YTD. I'm starting to think about moving just about all of it to a fixed rate (safe) option, just to ride out the storm, and then jumping back into equities when the worst of the storm is over. But a little voice inside my head keeps telling me not to do it.

Given that I don't need the savings for another 18 years or so, what do you experts think?

Don't do it, 18 years is plenty of time...the problem is you don't have any way of knowing when the worst is over..if anything I would do the opposite and move anything you have in cash into an agressive growth fund, I'm sure you'll get a cheap price regardless of the fund.

Here is some historical perspective to consider:

The Case Against Market Timing

There are investors who try to time their investments to take advantage of short-term swings in the market. They attempt to buy stocks just before they rise, and to sell just before they fall. Unfortunately, this practice — called market timing — can be a quick route to big losses for the majority of investors.
No one can reliably predict which way a stock will move over the near term. (The exception is a company insider who has information unavailable to investors; that's why insider trading is prohibited.) And even if you were lucky enough to make a few successful calls, the odds are against you over time. That's because the majority of gains in most stocks are due to a relatively small number of "up days."
A sobering example

The chart below illustrates the risk of attempting to time the stock market over a recent 20-year period. It illustrates two investment strategies for $1 invested in S&P 500 stocks from 1985 to 2005. The bar on the left shows what happens if the dollar is left alone for 20 years. The red bar shows what happens if that dollar had been "market-timed" out of the market for the 17 months with the highest returns.

Past performance is no guarantee of future results. Indices are unmanaged and not available for direct investment.
In other words, just 17 out of 240 months were responsible for 75 percent of the potential gain. Miss any one of those 17 months and your returns start decline. That makes the odds of picking the right months to market-time almost impossible


Principal.com - The Case Against Market Timing

[spartan_in_mpls]

Originally Posted by Feckweed

Don't do it, 18 years is plenty of time...the problem is you don't have any way of knowing when the worst is over..if anything I would do the opposite and move anything you have in cash into an agressive growth fund, I'm sure you'll get a cheap price regardless of the fund.

Here is some historical perspective to consider:

The Case Against Market Timing

There are investors who try to time their investments to take advantage of short-term swings in the market. They attempt to buy stocks just before they rise, and to sell just before they fall. Unfortunately, this practice — called market timing — can be a quick route to big losses for the majority of investors.
No one can reliably predict which way a stock will move over the near term. (The exception is a company insider who has information unavailable to investors; that's why insider trading is prohibited.) And even if you were lucky enough to make a few successful calls, the odds are against you over time. That's because the majority of gains in most stocks are due to a relatively small number of "up days."
A sobering example

The chart below illustrates the risk of attempting to time the stock market over a recent 20-year period. It illustrates two investment strategies for $1 invested in S&P 500 stocks from 1985 to 2005. The bar on the left shows what happens if the dollar is left alone for 20 years. The red bar shows what happens if that dollar had been "market-timed" out of the market for the 17 months with the highest returns.

Past performance is no guarantee of future results. Indices are unmanaged and not available for direct investment.
In other words, just 17 out of 240 months were responsible for 75 percent of the potential gain. Miss any one of those 17 months and your returns start decline. That makes the odds of picking the right months to market-time almost impossible


Principal.com - The Case Against Market Timing

I love how these charts never show you what your return would be if you had missed 3 or 4 of the WORST months in the market. Alot of people pulled their money out of this market in April. They could get back in now knowing theyve missed dramatic downside and are now unquestionably better than had they not pulled their money.

[DITKA ®]

Originally Posted by Tom Hagen

I don't ever look at my 401(K) or Roth balances.....why depress myself. However, increased my contribution to my 401(K) to a ridiculous level within the past 3 months.....so hopefully it will work out.

$15,500?

[DITKA ®]

Originally Posted by spartan_in_mpls

I love how these charts never show you what your return would be if you had missed 3 or 4 of the WORST months in the market. Alot of people pulled their money out of this market in April. They could get back in now knowing theyve missed dramatic downside and are now unquestionably better than had they not pulled their money.

You make the whole point of the original poster. Unless your a fellow professional with keen inside information that no one else knows including most bigwigs, you can't time the market, its spending time in the market.

The reason for showing those graphs is just to illustrate what can happen if you do try to time the market and fail.

Simple advice for all that you hear liberally is the only person who gets hurt on a moving rollercoaster is the one who jumps out.