Seems pretty simple, max out employer contribution (free money), try to pick a stable low-fee fund, and ignore it.
Pretty much this. Most don't have much in the way of options to screw up anyway unless they play around trying to time the market.Seems pretty simple, max out employer contribution (free money), try to pick a stable low-fee fund, and ignore it.
what do you guys think of lifecycle finds
If the market craps its pants and takes a dive, don't panic.
How that usually plays out:
<stock market dives>
"OH GOD OH GOD OH GOD!!!!! GET OUT!!!!!"
So you leap out of the market, selling your stock funds at a low point.
<stock market slowly climbs back to where it was>
"Ok, I think the market's finally looking good again. Phew, I'm glad that's over!"
Then you get back into stocks, buying at a high point.
Sell low, buy high. Someone was making money, but it wasn't you.
Stocks aren't everything, either. Bonds add some stability to a portfolio, but they historically give lower returns. Typically, the farther out your need for the investment is, the more you can afford to take risks with more stocks. You don't need to do this, it just means that you can afford it more easily. If the market dives 25 years before you need the money...so what? You don't need the money that is (or isn't) there. Hold tight, it should hopefully get back on its feet and get going again.
Make sure you withdraw it all or stop saving when you hit a $401,000.00 balance. 401ks max out at, surprise, 401k so you'll probably want to open another one.
I'm all about those index funds.
Only thing I would add in is, if you can figure out when the market is tanking. Doesn't have to be the start of it, could be just 1/2 way there, switch to bonds. Then when you feel it has bottomed out or close to it, go back to whatever funds.
I did this back last crash in, timing wasn't perfect but I gained a lot. I was all in on one fund. It topped out at $32, at $27 is when I left (Oct 2008'ish). It bottomed at $15 and got back into it at $17 (April 2009'ish), it's now around $32 range now. I'm' spread out across more funds now but nothing in bonds.
The crashes seem to happen every 8 years or so, so I just start keeping an eye out when the time comes.
Still waiting for the day we sticky one of these threads rather than have 5 pop up per week.
True, but the problem is, how do you know when it's "all the way down?" Or how do you know if it's truly a significant dive, or if it's simply because Ben Bernanke just discovered World of Warcraft, and the market's mildly apprehensive about how much free time he's going to have left for doing his job?Well the stock market doesn't dive in a single day, it dives over a period. So it's also equally bad to hold into a position all the way down.
And then too, how do you know when you've hit rock-bottom, and the market's about to climb? Or is the apparent climb just a little bump before it really digs down toward bedrock?Instead of selling off holdings which you really can't do in a 401k(unless it's been rolled over to your personal brokerage), it's better to watch the signs and move it into safer funds like a money market that won't have a sharp drop as a stock fund.
So for me, it's all about moving my position in and out of the various choices to mitigate damage and take advantage of recoveries.
Or start a separate forum section here for them. If our subforum collection grows any larger, the Smithsonian might start asking if we would like to donate it as its own exhibit.Still waiting for the day we sticky one of these threads rather than have 5 pop up per week.
Good news - the 401 section goes all the way to (m). Though it's lowercase, so that might actually be 401 millidollars.Make sure you withdraw it all or stop saving when you hit a $401,000.00 balance. 401ks max out at, surprise, 401k so you'll probably want to open another one.
Make sure you withdraw it all or stop saving when you hit a $401,000.00 balance. 401ks max out at, surprise, 401k so you'll probably want to open another one.
True, but the problem is, how do you know when it's "all the way down?" Or how do you know if it's truly a significant dive, or if it's simply because Ben Bernanke just discovered World of Warcraft, and the market's mildly apprehensive about how much free time he's going to have left for doing his job?
If it is truly abundantly clear though, shouldn't mutual funds, managed by people who are paid 7-digit salaries, not follow the same trend as the whole market? If it's abundantly clear, they should see the signs, and quickly shift their holdings out of the things that are in the process of tanking, and either go into something that's just a stable value, or else shift it into something else that's not going to be affected by the recession. Some companies or sectors continue to do well in recessions, or at the least, are not as severely affected. Instead, large mutual funds tend to follow the same trends as the major market indexes, falling drastically as the market drags down everything that's in it.Before I answer, let me reiterate that as far as 401k goes, I'm not suggesting that people sell off their investments at the first sign of trouble. All I'm suggesting, is that they move their more riskier investments into something safer when it's abundantly clear we're headed into a deep recession. So I'm only talking in terms of shit hitting the fan moments and not necessarily market correction events.
Ah, ok....so this is more of a rebalancing thing that you're looking at? Is it triggered by perceived market events? Or by some thresholds set for asset allocations?For example during the subprime meltdown I was diversified into several buckets of which I was invested into 90% stocks and 10% bonds. For the sake of simplicity, lets say the 90% was divided equally into small cap, mid cap, large cap, and international stocks. By Sept 2008 when Bear Sterns went belly up and everyone was moaning, it was at that point I decided to evaluate my situation. Gradually as I kept up with the news, I genuinely felt there was a negative atmosphere about where we're headed and knew there was more to come. So what did I do? I rebalanced my 401k to be bond heavy. In the end I still took a hit but it was a smaller hit and ultimately I admit it was a calculated move. I had started rebalancing back to my normal positions when the dow hit 9000 and if I recall it actually kept falling to about 6000 which was no biggie because although I rebalanced my 401k, I had continue to contribute to my 401k out of my pay normally into my original choices(it was too much trouble to adjust my contribution choices so I only rebalanced my existing holdings).
Anyway, I guess for those who don't care about their personal finances, your suggestion makes more sense but I believe when it comes to ones own money, people should do a bit of due diligence because it goes a long way.