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

[needhelp!]

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:

1. Four Pillars of Investing
http://www.amazon.com/Four-Pillars-I.../dp/0071385290
2. Random Walk Down the Street
http://www.amazon.com/Random-Walk-Do.../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-retire...ment-portfolio
Another excellent allocation, but your 401k may not offer all the selections:
http://www.mymoneyblog.com/archives/...llocation.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/

[hankles]

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]

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]

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]

Originally Posted by needhelp!

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]

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

[needhelp!]

Originally Posted by breddy2000

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]

Isn't 4 and 6 contradictory ?

Originally Posted by breddy2000

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]

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]

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-I.../dp/0071385290
2. Random Walk Down the Street
http://www.amazon.com/Random-Walk-Do.../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-retire...ment-portfolio
Another excellent allocation, but your 401k may not offer all the selections:
http://www.mymoneyblog.com/archives/...llocation.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.

Originally Posted by needhelp!

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]

Originally Posted by Canadian_Dream

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]

Originally Posted by needhelp!

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]

Originally Posted by needhelp!

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]

Originally Posted by breddy2000

....

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]

Originally Posted by desi3933

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.