401(K) allocations when is it time to move the money around [Archive]

needhelp!

01-27-2009, 12:11 PM

hankles

01-27-2009, 12:20 PM

My personal position is to stay put and toawait market recovery unless I have absolute and urgent need for cash. It may take a long time for market to recover but that's the point. 401(k) is a long term investment tool and should generally not be touched for accomodating short term strategies.

vin13

01-27-2009, 12:55 PM

I would try to balance my funds by different sectors. For example health care, manufacturing, banks, IT, etc. Also try to balance between International and domestic Hopefully that will even out the fluctuations.

Whenever i move to a different job, i would rollover the funds into an IRA. Not to the current employer's 401K. This way i would have a lot more mutual funds, stocks, etc to choose from.

I found it difficult to allocate based on the typical "aggressive", "growth", "income". Beacuse i am not involved in the strategy.

For those who do not want to put time into these can invest in mutual funds that have a target date for your retirement. The fund managers will balance the risk factors by putting in safer investments as you get closer to your retirement age.

sanjayc

01-27-2009, 12:57 PM

I was 50 % in bonds and 50 % divided equally between midcap value and growth. When dow hit 9500, i thought going 100 % into stock would be a good move and then moved everything into 25 % small cap and rest 75 % in midcap. Though it was not such a good move as dow eventually went below 8000, by the end of 2008 i was down 21 %. Current allocation is 100 % stock ( mid and small cap). Market seems to have stablized and let us hope to see some gains this year.

As most of the large caps has turned to mid and small cap in last year, hence percent gain in small and mid cap should be better than large caps, but just my opinion.

Employment is a lagging indicator of economy and with huge job losses everywhere around, we might be just around the corner, but many people have reservations and doom sayers are in full force everywhere.

Some people say around 8 Trillion is waiting in sidelines and that is a big sum. I am sure some of the money is already making it to real estate and stocks slowly. Last month record real estate sales might be an indicator.

breddy2000

01-27-2009, 01:29 PM

Thanks to the recent posts by IV members on trading, I got interested in checking out whats going on with my 401(K).

Compared my total contributions with the current value and looks like I've lost about 25% of what I contributed over the past 8 years (including employer contributions).

I had 54% in growth, 8.5% in aggressive growth, and 37.5% in income distributed among 6 funds (our 401K has about 21 total choices)

IV Financial experts, please advise if there are there any general guidelines to follow on how or when to decide to move funds around among the three categories? Especially in down times like these, is it wise to stay put?

Below are some of my thoughts for Risk Free 401(k) money management.

1.)My strategy would be plain and simple. Diversify as much as possible into various type of funds, like Large Cap, Mid Cap, Small Cap, International Diversified....Make sure you have diversified to an extent of going along with the Market Indexes.

2.) Pick low cost and divident oriented MFs or stocks and diversify as much as possible, This will atleast gaurantee, you will get returns matching the major Indices. Its very difficult to beat the market on a long term.

3.) Make sure that money goes into the 401(K) at regular intervals thereby assuring when the price goes down, you buy more funds and when price goes up you make more money. This is very critical, as in the current situations if you got scared and stopped contributing to 401(k) , then you will loose opportunities to buy low.

4.) Never time the market atleast for 401(k), cause it is not like trading and very difficult to manage money in 401(k) with trading strategies.

5.) By the time you near to retiring age, go conservative.Holding less in stocks and more in Bonds and Money Market.Depends on at what age you would like to retire.

6.) If you hear the "R"(Recession) word anytime in future again(not sure whether we will come out of the current mess), move the entire money into Money Market or Bonds and wait for the things to get settle down,before you add your money to funds. Usually Indices try to regain in value 4-6 months before the actual recession ends.

BTW I like the Indian Govt Provident Fund scheme with a gautanteed return of 9% per annum compounded until you retire. What more can we ask for. No need to get into this stupid strategies , diversification, costs, roller coasters etc etc....

Also, with the current rampant manipulation in the markets, unless there is a regulation to stop the current practice, its very difficult to not lose money forget about making profits...

Hope this helps....

shantanup

01-27-2009, 01:30 PM

Do nothing. Stay calm. And don't ever look at your 401(k) again.

needhelp!

01-27-2009, 01:35 PM

2.) Pick low cost and divident oriented MFs

How do I detect these attributes ?

When I selected my funds, all I went with was the table that showed the percentage gains over a period of time.

Also how to detect funds for this:

Make sure you have diversified to an extent of going along with the Market Indexes.

Canadian_Dream

01-27-2009, 01:39 PM

Isn't 4 and 6 contradictory ?

Below are some of my thoughts.

4.) Never time the market atleast for 401(k), cause it is not like trading and very difficult to manage money in 401(k) with trading strategies.

6.) If you hear the "R"(Recession) word anytime in future again(not sure whether we will come out of the current mess), move the entire money into Money Market and wait for the things to get settle down,before you add your money to funds. Usually Indices try to regain in value 4-6 months before the actual recession ends.

Hope this helps....

breddy2000

01-27-2009, 01:47 PM

Compared my total contributions with the current value and looks like I've lost about 25% of what I contributed over the past 8 years (including employer contributions).

Considering your situation of your loss at 25%. Based on the DOW Jones industrial average, it lost 10% during the past 8-10 Years. So ideally if you would have diversified as much as possible by putting in equal weight on each and every fund and buying at regular intervals(pay-check to pay-check), you should have lost only 10%. Just a thought.

Canadian_Dream

01-27-2009, 01:49 PM

Needhelp:
The best way to get financial help would be to read the following books cover to cover. Trust me you need to read them to get the right mind set and confidence to protect and grow your hard earned money. Read it in a month's time and you will know more than what most investment advisers would ever tell you. Never trust anyone to manage your money. Do it yourself !!!

1. Four Pillars of Investing
http://www.amazon.com/Four-Pillars-Investing-Building-Portfolio/dp/0071385290
2. Random Walk Down the Street
http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393315290

Also, open a free account at Morning Star and run a morning star X-ray on your portfolio and see actual allocation vs. target allocation. Also, check this out, a very balanced portfolio for someone in early 30's.
http://www.mymoneyblog.com/my-retirement-investment-portfolio
Another excellent allocation, but your 401k may not offer all the selections:
http://www.mymoneyblog.com/archives/2008/09/when-markets-collide-book-review-model-asset-allocation.html

One last word: Stay in passively managed low cost index funds. The best way to get more information on indexing is:
http://www.bogleheads.org/

Good Luck.

Thanks to the recent posts by IV members on trading, I got interested in checking out whats going on with my 401(K).

Compared my total contributions with the current value and looks like I've lost about 25% of what I contributed over the past 8 years (including employer contributions).

I had 54% in growth, 8.5% in aggressive growth, and 37.5% in income distributed among 6 funds (our 401K has about 21 total choices)

IV Financial experts, please advise if there are there any general guidelines to follow on how or when to decide to move funds around among the three categories? Especially in down times like these, is it wise to stay put?

breddy2000

01-27-2009, 01:55 PM

Isn't 4 and 6 contradictory ?

Yes it is... I knew when I was typing that. This is to put it in simple terms as the Unkown factor is the severity of the recession.

Usually recessions tend vary between 6 months to 2 Yrs. Dotcom lasted for 6 months. The current recession started in Dec 2007 and still no one has any clue as to how much longer it would last. So when the unkown factor is to be taken into account, its better to play it safe.
It will atleast make sure you have nailed in your profits.

Lets say a senario when DOW was 14000, in this case, "Need Help" would have been at 20-25% profit. If he would have put all the money into Money Market and wait for the things to get settled down, he has ample time to get back to where he sold off at 14000. There was a big talk about Recession, Housing Crisis and Credit Crisis when DOW was at 14500. It would have been good to wait until the economic indicators show some confidence before entering the market again.

Don't you think so.....?

breddy2000

01-27-2009, 02:03 PM

How do I detect these attributes ?

When I selected my funds, all I went with was the table that showed the percentage gains over a period of time.

Also how to detect funds for this:

If you go to any brokerage account they have all the details pertaining to each and every fund type. Example in Fidelity they list all the Funds based on Category(Large, Mid, Small) , their ratings, costs associated, companies invested in etc etc...

Always remember, Past performance of the MFs is no gaurantee of the future performance. Hence it is always better to diversify as much as possible.

Start with a broader category of Large, Mid and Small caps, you have funds that invest in diversified industry segments, so you need not be worried about which industry to be diversified into.
Then select funds with star rating and costs associated with. See the prospectus for divident details etc etc..

Hope this helps....

Canadian_Dream

01-27-2009, 02:04 PM

Especially in down times like these, is it wise to stay put?

You should never deviate from age balanced stock and bond allocation. Not in good times and not in bad times. Re-balance only at the end of the year to bring your bond and stock allocation to the right level. During bull years your stock allocation would go up because of gains so you have to move some part to the bond. (In a way you are moving your gains to bonds) and during bear market your bond returns will go up so you have to do the reverse. In down time like these it is not only wise to stay put but you should increase the allocation to stocks. Your equity-bond allocation must have been out of proportion because of losses in stocks and gains in bonds. A market crash early on is a good thing for your portfolio as you are buying low. In an extended bull market you would have continued to buy high. Treat this downturn like an opportunity.

desi3933

01-27-2009, 02:09 PM

....

4.) Never time the market atleast for 401(k), cause it is not like trading and very difficult to manage money in 401(k) with trading strategies.

......

Hope this helps....

I disagree with you on this.

I try to use long term indicators to get market direction and trend strength. This tells me when to move stocks/index based funds to say, bonds and gold based funds.

Book on charting -
Japanese Candlestick Charting Techniques by Steve Nison

My 2 cents.

____________________
Not a legal advice.
US Citizen of Indian Origin

breddy2000

01-27-2009, 02:18 PM

I disagree with you on this.

I try to use long term indicators to get market direction and trend strength. This tells me when to move stocks/index based funds to say, bonds and gold based funds.

Book on charting -
Japanese Candlestick Charting Techniques by Steve Nison

My 2 cents.

____________________
Not a legal advice.
US Citizen of Indian Origin

Technical Indicators can be used in any scenario. For day trading , swing trading or long term trading. If you have full control on the 401(k) when you can paly around with it on a daily basis, you can do so. But in my case, I do not have the previledge of making changes to 401(K) atleast for 6 months. In this case its better to see the long term economic indicators and make changes accordingly.

Candle stick technique is "NOT" just the only method to evaluate the price movement.

Canadian_Dream

01-27-2009, 02:20 PM

This is a classic example of market timing. I respectfully disagree with this approach it is full of peril and one could incur huge losses in this strategy, let me tell you why.

1. Recession is always called after we into it or past it. Beginning of a cyclic downturn is hard to predict because of usual fluctuation of stock market. So the idea that he can sell at 14,000 is a dream scenario and very very few could achieve it. If you can you can make a career in investment.

2. Gains are generally realized using year end re-allocations to bring stock-bond to the right proportion. In that way his gains are locked into bonds during bull cycle.

3. Selling during a downturn is a bad idea, because you could lock your losses by selling and you will not know when to get in. You get trapped into bear trap loosing even more money. On the other hand if you do not sell, your number of "shares" will remain unchanged regardless of the price and you never have to worry about when to get in.

4. The best thing to do during down turn is allocate more to stocks because you are buying low and reduce exposure to bonds because these are expensive. You will recover much faster.

5. No matter how bullish the market is never deviate from bond-stock age allocation because you don't want to get caught in bear market during around target retirement time. So say start with 75-25 (Stock-bond) and end with 20-80 (Stock-Bond) even if there was a greatest bull market around your retirement don't touch the 80, play with the 20 and go aggressive and keep the 80 in annuities or stay in bonds. This is the lesson some retirees have learned during this downturn. There was a prolong bull market since late 80' and now a bear run since 2000.

Yes it is... I knew when I was typing that. This is to put it in simple terms as the Unkown factor is the severity of the recession.

Usually recessions tend vary between 6 months to 2 Yrs. Dotcom lasted for 6 months. The current recession started in Dec 2007 and still no one has any clue as to how much longer it would last. So when the unkown factor is to be taken into account, its better to play it safe.
It will atleast make sure you have nailed in your profits.

Lets say a senario when DOW was 14000, in this case, "Need Help" would have been at 20-25% profit. If he would have put all the money into Money Market and wait for the things to get settled down, he has ample time to get back to where he sold off at 14000. There was a big talk about Recession, Housing Crisis and Credit Crisis when DOW was at 14500. It would have been good to wait until the economic indicators show some confidence before entering the market again.

Don't you think so.....?

needhelp!

01-27-2009, 02:21 PM

Thanks for all the links

Needhelp:
The best way to get financial help would be to read the following books cover to cover. Trust me you need to read them to get the right mind set and confidence to protect and grow your hard earned money. Read it in a month's time and you will know more than what most investment advisers would ever tell you. Never trust anyone to manage your money. Do it yourself !!!

1. Four Pillars of Investing
http://www.amazon.com/Four-Pillars-Investing-Building-Portfolio/dp/0071385290
2. Random Walk Down the Street
http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393315290

Also, open a free account at Morning Star and run a morning star X-ray on your portfolio and see actual allocation vs. target allocation. Also, check this out, a very balanced portfolio for someone in early 30's.
http://www.mymoneyblog.com/my-retirement-investment-portfolio
Another excellent allocation, but your 401k may not offer all the selections:
http://www.mymoneyblog.com/archives/2008/09/when-markets-collide-book-review-model-asset-allocation.html

One last word: Stay in passively managed low cost index funds. The best way to get more information on indexing is:
http://www.bogleheads.org/

Good Luck.

desi3933

01-27-2009, 02:24 PM

Technical Indicators can be used in any scenario. For day trading , swing trading or long term trading. If you have full control on the 401(k) when you can paly around with it on a daily basis, you can do so. But in my case, I do not have the previledge of making changes to 401(K) atleast for 6 months. In this case its better to see the long term economic indicators and make changes accordingly.

Candle stick technique is "NOT" just the only method to evaluate the price movement.

>> Candle stick technique is "NOT" just the only method to evaluate the price movement.
Absolutely. Just that I use candlestick charting with indicators (such as ADX). I use Ninja Trader as it allows me to custom program my indicators in C# (.net). There are, of course, tons of charting applications.

Long Term charting is where chart bars are weekly bars. It provides overall market picture.

Good Luck.

____________________
Not a legal advice.
US Citizen of Indian Origin

Canadian_Dream

01-27-2009, 02:25 PM

Easiest button would be life cycle funds if your 401K provider offers one. Not the greatest one but the best lazy portfolio !!!
Thanks for all the links

needhelp!

01-27-2009, 02:35 PM

I don't see Ticker symbol for some of my funds.. is this possible?

Canadian_Dream

01-27-2009, 02:42 PM

Unlikely, unless it is a stable asset fund for cash reserve.
I don't see Ticker symbol for some of my funds.. is this possible?

longwait4gc

01-27-2009, 02:43 PM

How do I detect these attributes ?

When I selected my funds, all I went with was the table that showed the percentage gains over a period of time.

Also how to detect funds for this:
my 2 cents:
1. Look at expense ratio. It is the % amount of money they charge you to mantain the fund. Ideally actively managed funds with expense ratio less than 1 better. But it may be difficult to find actively managed funds with less than 1% expense ratio in your 401k offerings. So pick one with less expense ratio.
2. Each fund has a strategy or goal. Like investing in foreign funds or small cap etc... See if their goal aligns with your goals.
3. Past gains are not indication of future. Distribute your portfolio across multiple funds.

yabadaba

01-27-2009, 02:43 PM

Thanks for all the links
needhelp:

you have been doing well. The market was down average of 34-38%...depending on which index you prefer to track....if you lost 21%; you are doing better than the market. it also means you are in a safer portfolio mix compared to the market. while now its good, because u did not lose as much as the market, when recovery happens (yes it will happen naysayers) you will not do as well as the market. For us, people who are 30 years away from retirement, the general rule of thumb is to be anywhere from 80-100% in equity. You can spread your allocation whichever way you like, but typically the market returns about 8% over the long term.

The other thing to keep in mind is the investment costs. typically mutual funds can have very high costs that would be relected in the expense ratios and fees. long term wealth buildding advice is to buy the whole market (namely an index fund) from low cost companies like Trowe Price, Vanguard and Fidelity. so if your funds in your 401k are from any of those three companies, you will most likely be in a good place.

In short, dont do anything other than changing your future allocations more towards 100% in equity index funds....and dont think about rebalancing your portfolio as it currently exists. leave what is in there... but change future allocations. cos now.. u r buying low and hopefully one day you will sell high.

needhelp!

01-27-2009, 02:48 PM

Unlikely, unless it is a stable asset fund for cash reserve.
They all have SSGA prefix but they have different names. like Stable value, S&P 500 Index .. so it won't be possible to analyze?

longwait4gc

01-27-2009, 02:50 PM

I don't see Ticker symbol for some of my funds.. is this possible?

Did you try typing the fund name in finance.yahoo.com quote box?
Is this one of the funds you are looking for?
http://finance.yahoo.com/q?s=SVSPX

h1techSlave

01-27-2009, 02:54 PM

desi3933

01-27-2009, 02:58 PM

I have been following Scott Adams (the same Dilbert guy) advise for some time and haven't lost out much.

The advise is:
1. Only invest in index funds. S&P 500 is my choice. Russel 2000 is too diversified. Dow is too limited - only 30 companies.

The only modification that I have done to his advise is to move all my money from the fund to all cash option after a couple of days rally. Following this strategy, I have lost 15.6% in 2008. Considering the overall market that is not bad.

I also trade in index funds - S&P 500 and Nasdaq 100. When market heads down, I move to money market or metal based funds.

In 2008, it was up 4.2%. Not too bad as compare to market.

** Not a trading advise. For information only **

____________________
Not a legal advice.
US Citizen of Indian Origin

needhelp!

01-27-2009, 02:59 PM

Yes. Thanks I'll try that!

Did you try typing the fund name in finance.yahoo.com quote box?
Is this one of the funds you are looking for?
http://finance.yahoo.com/q?s=SVSPX

Only the S&P 500 is there, other ones don't show up:

SSgA Stable Value Fund
SSgA Large Cap Core Equity Fund
SSgA S&P® MidCap 400 Index Strategy Fund

lord_labaku

01-27-2009, 03:14 PM

IMO the whole concept of 401k was a scam created with the collusion of govt. airheads and wall st. thugs. If they can scare you into thinking you need millions when you retire; then they can get all your retirement money to play with & to buy private jets.

hankles

01-27-2009, 03:17 PM

Many financial experts suggest using Dollar Cost Averaging as an effective strategy to overcome market fluctuations. This strategy is particularly effective because it takes away the need for speculation and trying to time the market.

This strategy is essentially nothing but investing a fixed amount of dollars at regular intervals in portfolio of your choice. Over a long period of time, since your fixed dollars have been invested at various highs and lows of market, you have taken out the risk of investing huge sums at highs and on the flip side have lost the opportunity of investing huge sums at lows. At the end, your odds of coming out at the top are much higher than the average speculative trader that resides, to some degree, in almost all of us .

Canadian_Dream

01-27-2009, 03:20 PM

SSGA Stable value is like a cash to most likely you won't find the Ticker. For the rest, all State Street funds should be on morning star. S&P 500:
http://quicktake.morningstar.com/FundNet/Snapshot.aspx?Country=USA&Symbol=SVSPX

They all have SSGA prefix but they have different names. like Stable value, S&P 500 Index .. so it won't be possible to analyze?

needhelp!

01-27-2009, 03:22 PM

We don't have any life cycle funds :(

Easiest button would be life cycle funds if your 401K provider offers one. Not the greatest one but the best lazy portfolio !!!

h1techSlave

01-27-2009, 03:31 PM

401K is basically a dollar cost averaging scheme. You invest a fixed % of salary every month irrespective of the market conditions.

Many financial experts suggest using Dollar Cost Averaging as an effective strategy to overcome market fluctuations. This strategy is particularly effective because it takes away the need for speculation and trying to time the market.

This strategy is essentially nothing but investing a fixed amount of dollars at regular intervals in portfolio of your choice. Over a long period of time, since your fixed dollars have been invested at various highs and lows of market, you have taken out the risk of investing huge sums at highs and on the flip side have lost the opportunity of investing huge sums at lows. At the end, your odds of coming out at the top are much higher than the average speculative trader that resides, to some degree, in almost all of us .

breddy2000

01-27-2009, 03:33 PM

hankles

01-27-2009, 04:04 PM

Agreed. However the idea is to use this strategy for other investments also.

401K is basically a dollar cost averaging scheme. You invest a fixed % of salary every month irrespective of the market conditions.

man-woman-and-gc

01-27-2009, 04:21 PM

If you are not planning to retire in the next 10 years, then this is the best time to invest as much as possible in the 401K. You will never be able to buy Stocks or mutual fund this cheap. They same contribution buys more stocks now. That's what I did....i have changed all my allocation to Stock type funds. My Investments are down 15%, but does not matter....i need to look what happens when I retire which is 30 years away. I also moved my existing funds into stock funds as well.

I would suggest keeping away from small cap, just becuase they seem to be the most risky ones among stocks. Other than that, distribute as much as you can in Stocks in your 401K and you would be glad you did that after 5 years. For now, don't even bother looking at the investment performance and losses.

Again, all depends if you truly consider 401K as your retirement income that you will not touch atleast 10 years. If there is any chance that you will take a hardship withdrawal for job loss or other family reasons, make it conservative, infact stay away from stocks.

Just an opinion...but I work in a 401K company and thts what I learnt in my little experience.

gjoe

01-27-2009, 06:31 PM

Move to stable funds which has treasury bill and govt bonds to avoid further losses until the market stablizes. Your portfolio looks pretty good with only 25% loss. most of them lost an average of 35% in the last 3 months of 2008.

Thanks to the recent posts by IV members on trading, I got interested in checking out whats going on with my 401(K).

Compared my total contributions with the current value and looks like I've lost about 25% of what I contributed over the past 8 years (including employer contributions).

I had 54% in growth, 8.5% in aggressive growth, and 37.5% in income distributed among 6 funds (our 401K has about 21 total choices)

IV Financial experts, please advise if there are there any general guidelines to follow on how or when to decide to move funds around among the three categories? Especially in down times like these, is it wise to stay put?

______________________
Just putting the links from Canadian_Dream here so I can find them easily:

gjoe

01-27-2009, 06:42 PM

Everytime the experts ask you to buy they mean they are going to sell.
In a bad market like this it is better to move all money to stable funds which will atleast maintian its face value and also add your new credits to the same fund. When you see the market has become stable you can do the same allocation what you have today. This way you will save the 8% to 15% you will loss this year. If you keep your loses close to zero in this market very good.
I see the market will settle when the Dow index comes close to 6500 points. Around that time if you see that the economy is stablizing you can go back to invest in the market. I don't see the economy getting better within the next 24 months.

This is a classic example of market timing. I respectfully disagree with this approach it is full of peril and one could incur huge losses in this strategy, let me tell you why.

1. Recession is always called after we into it or past it. Beginning of a cyclic downturn is hard to predict because of usual fluctuation of stock market. So the idea that he can sell at 14,000 is a dream scenario and very very few could achieve it. If you can you can make a career in investment.

2. Gains are generally realized using year end re-allocations to bring stock-bond to the right proportion. In that way his gains are locked into bonds during bull cycle.

3. Selling during a downturn is a bad idea, because you could lock your losses by selling and you will not know when to get in. You get trapped into bear trap loosing even more money. On the other hand if you do not sell, your number of "shares" will remain unchanged regardless of the price and you never have to worry about when to get in.

4. The best thing to do during down turn is allocate more to stocks because you are buying low and reduce exposure to bonds because these are expensive. You will recover much faster.

5. No matter how bullish the market is never deviate from bond-stock age allocation because you don't want to get caught in bear market during around target retirement time. So say start with 75-25 (Stock-bond) and end with 20-80 (Stock-Bond) even if there was a greatest bull market around your retirement don't touch the 80, play with the 20 and go aggressive and keep the 80 in annuities or stay in bonds. This is the lesson some retirees have learned during this downturn. There was a prolong bull market since late 80' and now a bear run since 2000.

Canadian_Dream

01-27-2009, 09:36 PM

Everytime the experts ask you to buy they mean they are going to sell.

People are recommending what has worked in past 200 years, there is little reason to believe that it will suddenly stop working. The world will continue to grow and well run large and small corporations will continue to deliver the share holder equity and dividends. There will be cyclic downturns they have always been the part of the equation. There is nothing wrong with ultra-conservative investments like stashing the money under the mattress but you have to remember you are playing against the power of compounding and time. Your dividend invested returns are compounded in an equity investments. A 5% equity market return is compounded for the number of years it is invested. If you stood out during early years thinking all this is a scam there is little you can do in later years simply because you have no time left to compound your returns. You can experiment at your own risk.

In a bad market like this it is better to move all money to stable funds which will atleast maintian its face value and also add your new credits to the same fund. When you see the market has become stable you can do the same allocation what you have today. This way you will save the 8% to 15% you will loss this year. If you keep your loses close to zero in this market very good.

All your losses are in paper until you sell, and since we are talking about 401K there is no need to sell until next 20-25 years.. If you sell today you simply locked your losses to feel good in paper. You have to remember that number of stocks are unchanged and it is the price that has changed. Yeah you saved 8 to 15% but lost 40% from the peak. Besides there is no guarantee that 8 to 15% saving that you are talking will materialize it might be that market will start moving higher while you are in the sidelines and instead of saving 8 to 15% you lost these gain plus your original loss. You are falling for classic market timing peril. People have lost everything doing just what you have suggested.

I see the market will settle when the Dow index comes close to 6500 points. Around that time if you see that the economy is stablizing you can go back to invest in the market. I don't see the economy getting better within the next 24 months.

Congratulations, if you can call the bottom and see the recovery you are one of the very few who could do that. So far no one has been consistently able to do it. Also, let's say DOW does go to 6500 as you predicted and you invest and then it goes down to 4000, do you recommend getting out again then ? And how long we play this game until complete principal erosion ?

IMHO: Actively buying and selling is the most dangerous thing to do to your 401K. All you need to do is simply stay in World Diversified Indexes and make your contribution in good times and in bad times. Leave the rest to the compounding. Some corporations win and some will loose, some countries will provide the best gains and some will fizzle but you got nothing to worry because you have invested in them all !!!

nayekal

01-28-2009, 01:00 AM

DOW had a series of continuous set backs from second week of January 2009 as we are getting news about quarterly results from several major corporates along with job cuts. But most of these issues were already factored into the kind of value we are seeing for DOW and still havering around 8000 to 8500 points. Even today, we had worst results, but the DOW gained.

Investors are clearly pumping money since they (most of them) believe, that the stimulus package might work out and and they are seeing a trend which looks like DOW is stabilizing. I believe, 8000 points for DOW is more likely the bottom for that. This is a right time to invest.

My opinion is to keep on investing into your 401 K Plan at least as far as your company contributes (that's what I am doing), since this is going to be a long term investment. I went a little bit more aggressive after financial melt down and invested everything in small cap (High Risk Funds) and my 401 K had profit rise up by 7.3% (just for 2008).

I personally believe, that most of us spend a lot and don't save a lot. For people like me, 401 k is a good choice.

gchopes

01-28-2009, 10:55 AM

nayekal - How did you acheive a 7.3% return on your 401k in 2008 when everything was down in double digits? Even if you dollar cost averaged on stock mutual funds in 2008, you would still come out negative I would think unless there is something I am missing here. Thanks.

DOW had a series of continuous set backs from second week of January 2009 as we are getting news about quarterly results from several major corporates along with job cuts. But most of these issues were already factored into the kind of value we are seeing for DOW and still havering around 8000 to 8500 points. Even today, we had worst results, but the DOW gained.

Investors are clearly pumping money since they (most of them) believe, that the stimulus package might work out and and they are seeing a trend which looks like DOW is stabilizing. I believe, 8000 points for DOW is more likely the bottom for that. This is a right time to invest.

My opinion is to keep on investing into your 401 K Plan at least as far as your company contributes (that's what I am doing), since this is going to be a long term investment. I went a little bit more aggressive after financial melt down and invested everything in small cap (High Risk Funds) and my 401 K had profit rise up by 7.3% (just for 2008).

I personally believe, that most of us spend a lot and don't save a lot. For people like me, 401 k is a good choice.

gjoe

01-28-2009, 11:14 AM

People are recommending what has worked in past 200 years, there is little reason to believe that it will suddenly stop working. The world will continue to grow and well run large and small corporations will continue to deliver the share holder equity and dividends. There will be cyclic downturns they have always been the part of the equation. There is nothing wrong with ultra-conservative investments like stashing the money under the mattress but you have to remember you are playing against the power of compounding and time. Your dividend invested returns are compounded in an equity investments. A 5% equity market return is compounded for the number of years it is invested. If you stood out during early years thinking all this is a scam there is little you can do in later years simply because you have no time left to compound your returns. You can experiment at your own risk.

All your losses are in paper until you sell, and since we are talking about 401K there is no need to sell until next 20-25 years.. If you sell today you simply locked your losses to feel good in paper. You have to remember that number of stocks are unchanged and it is the price that has changed. Yeah you saved 8 to 15% but lost 40% from the peak. Besides there is no guarantee that 8 to 15% saving that you are talking will materialize it might be that market will start moving higher while you are in the sidelines and instead of saving 8 to 15% you lost these gain plus your original loss. You are falling for classic market timing peril. People have lost everything doing just what you have suggested.

Congratulations, if you can call the bottom and see the recovery you are one of the very few who could do that. So far no one has been consistently able to do it. Also, let's say DOW does go to 6500 as you predicted and you invest and then it goes down to 4000, do you recommend getting out again then ? And how long we play this game until complete principal erosion ?

IMHO: Actively buying and selling is the most dangerous thing to do to your 401K. All you need to do is simply stay in World Diversified Indexes and make your contribution in good times and in bad times. Leave the rest to the compounding. Some corporations win and some will loose, some countries will provide the best gains and some will fizzle but you got nothing to worry because you have invested in them all !!!

For 200yrs dollar cost averaging has worked according to you. But what you fail to understand is averages are only nice on charts and a good marketing tool. For example ff I freeze one half of you at 0C and heat your other half to 100C on an average you should be ok after an hour since the average temp was only 50C.

If I say I save 8% by not investing on funds that lose 8% this year. Let us say both of us invested X amount of money and you lost 8% more than me. For the next year I have 8% more than you to begin with or in other words your fund units are cheaper by 8% than when you bought them. I can buy more of the units you hold and get higher returns if I buy them back when the market is ready to turn around. That is the math behind what I suggested.

The Dow bottom of 6500 is the most optimistic I could make based on the current market and world events. It can go further below 6500 if the situation changes over the next 2 years. One thing is for sure there is no way things are getting better as of now for the market to jump up within the next 18 months.

nayekal

01-28-2009, 11:24 AM

Canadian_Dream

01-28-2009, 01:31 PM

If I say I save 8% by not investing on funds that lose 8% this year.
How would you know which fund is going to loose 8% ? You are performance chasing.

For the next year I have 8% more than you to begin with or in other words your fund units are cheaper by 8% than when you bought them.
What if it goes higher ? Then you buy high. How will you know when is the appropriate time to buy ?

I can buy more of the units you hold and get higher returns if I buy them back when the market is ready to turn around. That is the math behind what I suggested.

There is nothing wrong with you math except you are assuming you will know the market movement well in advance and make your bets, that's a very hard thing to do. Let me ask you something did you sell when S&P was 14,00 and DOW 14,000 ? If you did, then you have a knack for market movements and you can continue doing what you do as long as it works for you. For me buy and hold with cost averaging has worked just fine. I don't believe in predicting market movements and I hardly sound like a broker, a broker will suggest you to actively buy and sell because he gets commission every time you buy and sell. What I am suggesting is stay diversified in passively (no active stock picking, buying and selling) managed world diversified indexed funds and don't look at your 401K portfolio everyday.

h1techSlave

01-28-2009, 02:26 PM

This is a continuation of my earlier posting some where on this thread..

Today the S&P 500 has rallied around 3%. My guess is that tomorrow it might go up a little more.

S&P was 805 on Jan 20th and there was a continuous rally for the last 6-7 days. So the next couple of days most likely will see a decline.

Final recommendation: Sell your positions today or tomorrow and buy all cash/bond/fixed income stuff. Watch for S&P 500 to come back to around 830 before you move money in to S&P 500 again.

Disclaimer: The above is just my personal opinion. You can loose money if you follow my advise. If you gain a substantial amount of money, please donate some of that money to IV :). IV does not pay me a commission. I do have positions in S&P 500 and am planning to sell it today or tomorrow.

21stIcon

01-28-2009, 04:01 PM

Final recommendation: Sell your positions today or tomorrow and buy all cash/bond/fixed income stuff. Watch for S&P 500 to come back to around 830 before you move money in to S&P 500 again.

Disclaimer: The above is just my personal opinion. You can loose money if you follow my advise. If you gain a substantial amount of money, please donate some of that money to IV :). IV does not pay me a commission. I do have positions in S&P 500 and am planning to sell it today or tomorrow.

How much you made so far in the market?
Please post your trading record before crapping out this forum....

longwait4gc

01-29-2009, 02:41 PM

my thoughts exactly ..h1b's post does not make any sense ..sell now buy later..sell at 850 buy bonds(hope he knows that there are loads and costs involved when you buy and sell) ..if you have lost a lot then just hang in there especially if you don't need the money ...1-2 years from now, the market will definitely recover(it won't reach the heights but it will be better than it is now) ..to pull out now means a sure loss

AlbertPinto, You are right. H1 tech might be new to market (no offense h1). Apart from huge costs Most of the 401K wont allow you to do day trading(or frequent trading) on mutual funds and bonds. If they think you are day trading on mutual funds they might ban you (Source Fidelity financial advisor I met last year). If you want to trade frequently (or day trading) then they recommend you open stock account and do whatever you want.
He is also trying to time the S&P index. This could be a very bad idea. If you are long term investor look for value picks which are beaten down due to the recession. The companies survive recession will come out strong. They will come out stronger than any index.

Canadian_Dream

02-09-2009, 06:41 PM

http://www.mymoneyblog.com/archives/2009/02/401k-failures-over-last-20-years-the-average-investor-did-worse-than-cash.html
Here the evidence: For the 20-year period from 1988-2007, the S&P 500 had annualized returns of 11.81%, while investment-grade bonds returned 7.56%. But what did the average mutual fund investor return? Only 4.48 percent. That’s worse than super-safe Treasury bills, which managed 4.53% annually!

Also a good read:

http://assetbuilder.com/blogs/scott_burns/archive/2009/01/30/if-you-play-the-odds-it-s-time-to-buy.aspx

snathan

02-09-2009, 09:15 PM

Did you do your part....Please contribute

http://immigrationvoice.org/forum/showthread.php?t=23597&page=1000

forgerator

02-12-2009, 11:50 AM

needhelp!

02-12-2009, 01:02 PM

Folks thanks for all the inputs. I haven't made any changes yet as I am still reading the books recommended and would like to learn more.

Before I posted this thread, I had made a change to reduce my contributions thinking that I will get more take home pay instead and try to make more payment towards house, but I noticed that after taxes, it is only a fraction, so I think that was a bad decision and I will start contributing more to 401k again.

I noticed an option to "Automatic account rebalance" on the 401k website. Is it a good idea to opt in for this?

Canadian_Dream

02-12-2009, 01:31 PM

I noticed an option to "Automatic account rebalance" on the 401k website. Is it a good idea to opt in for this?

It is like an auto pilot/cruise control that will rebalance from current allocation to target allocation, not a very reliable tool. I would rather do it at the end of year manually, that way I have more control on the transactions. Also, the new target allocation funds like Life Cycle Funds and Hybrid 401K's change the underlying funds to constantly keep your allocation age balanced so there is not need to rebalance at all.

http://www.investopedia.com/articles/mutualfund/05/051005.asp
http://www.businessweek.com/magazine/content/09_07/b4119061756100.htm?campaign_id=rss_daily

Canadian_Dream

02-12-2009, 01:41 PM

Folks thanks for all the inputs. I haven't made any changes yet as I am still reading the books recommended and would like to learn more.

That's certainly going to help you in long run. It will change your mind set on how you look at investment and retirement. That's something no one can teach you.

Before I posted this thread, I had made a change to reduce my contributions thinking that I will get more take home pay instead and try to make more payment towards house, but I noticed that after taxes, it is only a fraction, so I think that was a bad decision and I will start contributing more to 401k again.

You did the right thing. Always max out on your 401K, Traditional IRA and College Savings Funds (if you have kid(s)) that would be putting aside 23,500 (or even more if you employer matches) in a tax free growth. You earning potential will peak and then it might go down a bit so it is good to contribute early. If you take this money out and put it in you regular bank account it will give you a false sense of security but you are indirectly stealing from your retirement and kids education. You might not have enough time in future to make up for it. Start early and stay put.