Stock Market and 401k

So, I felt like a genius last weekend after moving half my 401k out of the market and into a fixed income fund. Yesterday on the bounce I got the other half out. Watching the market up and dooooown this week I felt pretty good and slept great last night.

Well look at things today. We may close up for the week. Insane. In other words, for all the effort and suffering I did thinking about what to do, I’d be in exactly the same place if I had done nothing.

I really hurt through the 2008 fall. I made a deal with myself never to go through that again. Difficulty this week is my balance is hovering right around a benchmark I promised myself not to fall below. But, I may need to just put it all back in, close my eyes and hope for the best. Hell of a way to “plan” for the future. Feels more like gambling than investing.

Anyone have a strategy that works for you? I’m not looking to become a trader. Just want to make some money in my 401k.

how far are you till you get your 401k? I got 25 years so I am not touching it till the markets stablize in the next 10 years hopfully.. nor do I care to look at it till than

Well, it kind of depends on how the 401k does. Our hope is that I can get out in about 9 or 10 years and retire early as soon as the kids are through school.

even with early retirment you would not want to draw on a 401K and take the penality..

No matter what the stock market does, you don't make or lose money till you sell.

I had several customers cost themselves thousands of dollars this last week by getting in a panic and selling when they didn't need to.

I put in extra month's contribution on Saturday...still not sure if that was a good or a bad move.

In reply to GrantMLS:

I've lost 10% of my retirement in the past couple of months.

I'm sure it will be back in a couple of years, I'm not touching mine, either.

GrantMLS wrote: even with early retirment you would not want to draw on a 401K and take the penality..

No, I know that. My wife just graduated from graduate school and started a new job. Once the kids are through school we'll have much lower expenses. We'll be able to live just fine on her income until she decides to retire as well. The plan is to let the money in my 401k continue to simmer until she hangs it up.

I have a traditional IRA which came from the 401k at a previous employer. i rolled into the IRA in 2003 with about $140k. i am set up for reinvestment of dividends, and that's the only additional contribution over the original amount.

by the middle of '08 it was around $180k

in late '08 / early '09 it was below $90k.

three months ago it was over $200k.

i buy and hold decent funds plus a few individual stocks and a few corporate bonds that are paying near 6%. sometimes, if one asset underperforms for several quarters, i'll dump it for something else. but that's less than 10% of the portfolio and less frequently than once a year that i move something.

Everyone calm down, take a pill, or a couple of wobbly pops and wait. Patience is a virtue when your playing in the stock market. I've "lost" a 6 digit number, so I just stopped looking at it every day. It may take longer to recover than it has in previous downturns, but it will come back and it doesn't matter a darn until I need to sell something. I just wish I had some extra cash to put in when things are a bargain.You never see the media raving about all the bargains you can get right now.

found on the web somewhere:

Words of wisdom from Peter Lynch: “The real key to making money in stocks is not to get scared out of them.” -Peter Lynch And if you don’t trust Peter’s judgment, consider this… From 1982 to 2001, the S&P 500 gained a 11.8% per year. Had you invested $10,000 at the beginning of this timeframe, you’d have $93,075 if you keep your nerve through the ups and downs and stayed in the market. In contrast, these are the returns if you jumped in and out and even slightly mis-timed the sometimes dramatic recoveries from the bottom: If you missed the 10 best days, you’d have $56,044 If you missed the 30 best days, you’d have $28,144 If you missed the 50 best days, you’d have $15,780 Considering that there are roughly 250 trading days in a year, this means that missing out on the best 0.02% of the investing days over this 20 year period (i.e., the best 10 of 5000 days) would’ve reduced your total return by nearly 40%! In contrast, if you’d sat tight throughout, you’d be sitting pretty right now.

My financial advisor called me yesterday. I told her I wanted to let things ride, and she agreed. Jumping in and out of the market, without the benefit of a time machine to predict when to do it, is generally not a good idea.

In reply to AngryCorvair:

Yeah, I know that. And I've preached that before. But I think that's a little selective memory. I'm not going to do the detail research to make statements like above, but you can see a lot just glancing at a big chart of the DJIA. For instance, if you got into the market sometime in 1999, right now you're flat for your twelve years of investment. And it looks like you spent more time underwater than you did in the black.

If you look at the chart before '99, you don't see decades of flat. Yeah, if you got in back in '82, you're going to be way up. But we're talking almost 30 years there. And the enormous volitility we're living with now didn't start until you were about 15 years into that investment. If it was '82, I'd say the same thing. But it's not anything like it was then.

Now, if you got cold feet in '08, well into the slide, when the Dow slipped under 10k (like I did) and you pulled all your money out (like I didn't) then you jumped back in well into the recovery, say at 8k in '09 you made a TON of money. That's not day trading. That's just making a move from time to time on the HUGE swings. Sure, a lot of us didn't do it then because we keep saying "you haven't lost it 'till you sold it". And yeah, it came back. But we sure aren't making the kind of gains we were counting on to get to a decent retirement. Looking back, I'm wondering if it's prudent in this day and age to make a move every now and then when we see enormous volitility.

I think I'll stay out until I see a VIX under 30. Seems like the market is moving big on headlines. I don't like that. There's no way to see it coming. Just winning or loosing tens of thousands of dollars on news that isn't the least bit substantial on a 10 year scale.

I'm a fan of dollar cost averaging. Stay the course and don't freak out. I have also been good and not checked my total portfolio value all week. As my grandmother once said, it's just value on paper.

Still, a year or so ago I did sell a ton of funds and buy new ones. Some were crap, some had run their course. This time I had an expert help. So far, so good.

stuart in mn wrote: Jumping in and out of the market, without the benefit of a time machine to predict when to do it, is generally not a good idea.

Nicely put. If there's a PS to that, now the market is on sale. Time to buy.

David S. Wallens wrote: Nicely put. If there's a PS to that, now the market is on sale. Time to buy.

Well, again, that’s what I’ve always said too. But just to play devil’s advocate for a minute, let’s look at another example. In July ’07 the Dow as at 13,895. Six months later, in Jan ’08 it was at 12,262. Using the logic people like you and I have always used, we would have said “Hey, it’s time to buy! Market is down more than 1,600 points!” So, say we put $10,000 in at that level. One year later, in Jan ’09, that $10k was worth $6,200.

On the other hand, if you were in the market with $10k in July ’07 and watched it fall until Jan ’08, your $10k was worth $8,800. Conventional wisdom would say don’t get out. You haven’t lost it ‘till you sell it. But you got scared and sold it anyway. Not big time market timing. You were six months into watching the market fall.

Okay, so you lost some money. You watched from the sidelines as the market fell to 7,608 by Jan '09. Then you watched as it started back up. You watched for three months as it went up. Finally, in April ’09, you jump back in. You take your $8,800 left from your original $10k and put it in the market. In April ’11, you have $12,927.

What happened if you just sat tight in July ’07? Your $10k rides it out and in April ’11 you have $8,900. In four years you’d have made nothing (like I did) and actually lost a little more than 10%. Look at my scenario – I’m not artificially picking the ideal top and bottom of the market with hind sight. I’m looking months into trends and making only two moves.

I don’t know. Like I say, I’m just playing devil’s advocate. I’ve always been a long term investor and this is the first time I’ve ever jumped out. It may be a mistake. I know the market is up today. But I don’t see any reason to think it should be or anything to indicate that it will be up next week. Not to mention, this is the most volatile week in history. I could make a case that it’s not acting like a smart, long term investment. It’s acting more like a casino game. Years ago, a big day on Wall Street was moving 100 points. With the kind of money I had, you could make or lose a grand or two. This week I’m seeing my balance swing tens of thousands of dollars in a couple of hours.

I’m not saying “everything is different”. I’m just asking, what if everything really is different this time? What if there is a fundamental change? There’s no question we’ve seen things in the last months and significantly, in the last week, that we’ve never seen before. The situation in Europe is a real mess. On top of that, France, a “stable” country, reported zero growth today. I can make a case that the debt and bank situation in Europe will drive things down for a while. I don’t know. Just wondering.

the idea that it is only a loss if you pull it out, is great in theory ... but I'm in my 60's and need to start withdrawing soon... sure would love to see a strong bull market for about 3 yrs

Buy and hold was a mantra and a strategy that worked for a long time. I a no longer of the opinion that it is an effective approach.

I know you are going to ask me for a better solution. I don't have one.

But let's be honest- it's an idiot's approach. I've done it for years too.

There was a time when good solid companies like AIG, Lehman Brothers, Circuit City, and GM were sure wins over time. Not so good now. Decent stocks and funds are not even clear to identify anymore.

My wife and I have begun to get better educated in these matters. It didn't take long to identify a couple of big ways to improve our standing. We are not making any changes until we dig a little deeper and learn a little more.

The best investment is in your own education. There's a lot to learn out there other than "buy good stuff and hold it for a long time".

I was watching Jim Cramer on Tuesday, and he made an interesting point. If you had invested the day before the 1987 crash, one year later you would have still been ahead. I just thought that was interesting.

That seems like a bit of narrowly selective data. Why 1987? What about the 16 or so crashes since?

Exactly. 1987 - when the economic world still worked. 1987 might as well be investing in the Martian stock market. I'm sleeping just fine this weekend knowing my 401k will be worth just as much Monday as it was when I left work today. We'll see what next week holds. If I miss out on a big day, so be it. I'm not giving back 100k again.

By the way, Jim Cramer is a moron. Well, no, he's not a moron. I'm sure he does really well making money on MSNBC. But as far as investments are concerned, he's a complete moron. He runs some kind of charity fund since the MSNBC folks aren't allowed to invest in individual stocks. Here's a shocker for you. An S&P 500 index fund (my primary investment option of choice) out performs his fund year in and year out.

SVreX wrote: That seems like a bit of narrowly selective data. Why 1987? What about the 16 or so crashes since?

I think 1987 because percentage-wise nothing has yet touched that drop. His point was that the market came back from 1987's losses, and it's also really, really hard to time things.

And I'm not saying he knows all. It was just an interesting point.

Also, stay diversified. That's another one of my rules.

I knew a E36 M3load of retirement ready folks who got whacked big time in '08 because they were still in aggressive growth funds thinking nothing could go wrong... and had to keep working. I thought everybody knew to be more conservative the closer to retirement, guess not.

fasted58 wrote: I knew a E36 M3load of retirement ready folks who got whacked big time in '08 because they were still in aggressive growth funds thinking nothing could go wrong... and had to keep working. I thought everybody knew to be more conservative the closer to retirement, guess not.

I'm sure all of the big investment houses offer it, but mine offer retirement mutual funds that start off aggressive and get conservative over time. Each one is geared toward a specific retirement date. Pick your date and let the mutual fund manager mix the soup to meet your investment goals.

My program has the date target plans too. I may look more closely at them.