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401k - Is it wise to move to conservative now? in: Subjects › Investing

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   posted: Oct. 9, 2008 @ 3:47p
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Here are my thoughts:

Everytime there's a downturn in the economy, all the financial advisors keep saying "KEEP INVESTING! DON'T PULL OUT OF THE MARKET!!!"

Now, I'm still investing in my 401k at full amount (I'm 35 years old), but it's hard to watch my 100k dwindle down 30% in one year.

My thoughts:

If you think the stock market will continue to slow or drop, move most of your money from mid/high risk investments to conservative.

The reasoning:
Currently, the dow is losing 5-7% at a time. I don't think it's going to go up more than 1-2% as it climbs out of the hole.

What have other people done?

   posted: Oct. 9, 2008 @ 3:47p

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   posted: Oct. 9, 2008 @ 3:55p
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I wouldn’t move it. If you have right selection you have time to recover your losses

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   posted: Oct. 9, 2008 @ 3:57p
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ds394 said:

What have other people done?

Its incredibly tough to see when this malaise will end. I'm not sure what I'd do if I was invested in the market right now as I expect a headfake rally sometime late this year/early next.

I've been in bonds since last summer when this whole thing started to unwind. Lately even some of those have been taking a hit

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   posted: Oct. 9, 2008 @ 4:06p
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The thing is... it's so easy to move things around for just a week or two... I thought about doing this earlier this week and now I've got that "Hindsight" feeling where I want to kick myself in the shins a couple of times.

The only big danger I see is if the market suddenly does a flip and jumps 5% or more in a day... then I'd miss out on it.

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   posted: Oct. 9, 2008 @ 4:10p
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ds394 said:The thing is... it's so easy to move things around for just a week or two... I thought about doing this earlier this week and now I've got that "Hindsight" feeling where I want to kick myself in the shins a couple of times.

The only big danger I see is if the market suddenly does a flip and jumps 5% or more in a day... then I'd miss out on it.

Thats the risk. The market bottoms I've seen are never formed by x number of days in a row down y%. Typically there are headfake rallies along the way which are just as volatile on the upside as the downward swings are.

The overall direction is clear but markets don't bottom like this from my experience.

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   posted: Oct. 9, 2008 @ 4:11p
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I only started my 401k in the past year, and I only have around $1800 contributed thus far.

However, once things started getting bad a few months back, I shifted my accumulated money (around $1800) over to bond funds, and have kept my new contributions split among higher risk funds such as the S&P index. I plan on waiting until things start looking up again, and then shifting my larger chunk of money back over to the higher risk investments.

Of course, this is all mostly meaningless since I am 26 years old, with 45 years until retirement and pretty much no money in my 401k. However, I just thought I would throw in my 2 cents. I think I am going to keep my new contributions going into the higher risk investments for the time being, hoping that I catch the bottom and things go up from here over the years. My company match (100% up to 5% of my salary) lessens the risk a bit.

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   posted: Oct. 9, 2008 @ 4:12p
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ds394 said:Here are my thoughts:

Everytime there's a downturn in the economy, all the financial advisors keep saying "KEEP INVESTING! DON'T PULL OUT OF THE MARKET!!!" Now, I'm still investing in my 401k at full amount (I'm 35 years old), but it's hard to watch my 100k dwindle down 30% in one year.

My thoughts:
If you think the stock market will continue to slow or drop, move most of your money from mid/high risk investments to conservative.

The reasoning:
Currently, the dow is losing 5-7% at a time. I don't think it's going to go up more than 1-2% as it climbs out of the hole.
What have other people done?

One is a general comment about financial advisors:

Ask them to produce their Schedule D. If their return is higher than yours in %, then you may want to listen to what they have to say. If their return is lower than yours, you should not listen to them because you are -beating- them.

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   posted: Oct. 9, 2008 @ 4:15p
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I'm a few years younger than you, and I have about $20k in a Roth IRA, as does my wife. We've been maxing out our contributions each year for the last 3 or 4 years now, and we plan to continue doing so. If we had enough money to put in this year's contribution now, I'd be looking to do so very soon.

There are studies out there against day trading and swing trading that say "If you missed only the top 5 biggest gaining days each year for the last 20 years, your return drops from +XX% to -XX%." But my guess is that if you switched that argument around to only eliminate the top 5 biggest losses, your annual returns would skyrocket. So, there is something to be said for "market timing" if you ask me.

But if you already have LONG TERM money in the market now, the only thing you accomplish by taking it out is that you realize those losses. If you're confident that you can time the market and catch the upside, then you might make an extra few percent for your trouble. But I am not at all confident in being able to do that, so I'm just riding out the storm. 30 years from now, this will be a distant memory.

Buying opportunity, YES! Trading opportunity, no.

Message edited by: Tarajunky on 2008-10-09 16:16:26 CDT
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   posted: Oct. 9, 2008 @ 4:15p
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I've increased my contribution from 9% to 13% of salary and left my allocation alone.

If you move to a more conservative allocation, you'll lose less but you'll participate less in the upside.

Maybe a good move a year ago, but hey, hindsight is 20/20. At this point you've already lost the money. Why give up on your chance to make it back?

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   posted: Oct. 9, 2008 @ 4:16p
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I got neurotic and irritated when updating my Quicken didn't give me new net worth highs any longer.

Then I stopped updating Quicken.

Then I started getting really irritated with the fact updating Quicken in the next 5 years will result in disappointment.

Then I said, screw it, I will not track retirement accounts in Quicken any longer.

Then this last week happened. S&P has become a drinking game. 1% down = 1 beer. 7% down, no problem.

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   posted: Oct. 9, 2008 @ 4:24p
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I just kind of feel like financial advisors and wall street investors are all in on this together. Why is the dow down? Well, aside from crashing stocks blah blah blah, I think it's exacerbated by those advisors and investors pulling all their money out and investing in lower risk options. Then, they keep telling everyone else to "Keep your money where it is" so that they can at least pull back while everyone else takes the hit.

I know, this sounds extremely cynical... but I just feel like they're laughing at me. So now I'm sure I'm acting like the fool by going low risk because tomorrow I'm sure the dow will hit 12k.


As an aside, here's a game for people to goof around with to "daytrade":

Chart Game

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   posted: Oct. 9, 2008 @ 4:36p
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If you know things will be lower than of course you should sell. You are also in the wrong line of work.

It's your money, make your own decision and be responsible for that decision.

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   posted: Oct. 9, 2008 @ 4:50p
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ds394 said:What have other people done?I took my money out a few weeks ago before the bailout talk. I asked myself...would I put more money into this market? The answer for me was no as I viewed it as too big of a gamble. So I took the money out. Yesterday I put it back in because I felt there had to be a bounce soon. After today's 7% loss, I'm not so sure, but will stay in for now. Last year, it felt too good to be true that my mutual funds had gone up so much and I thought about pulling the money out, but I listened to the experts to leave money in for the long haul. So I lost a huge percent of my account and am now in the negative since I started putting money in 3 or 4 years ago. I'm going to go with my gut in the future as long as I'm sure I'm OK with the consequences if I'm completely wrong.

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   posted: Oct. 9, 2008 @ 4:56p
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i just opened a roth on monday... put 2500 in (zecco)... god am i glad I didn't buy anything yet. Sheesh. Already lost $6k in my regular stock account, sold everything and withdraw the remaining $4500. So much for margin being a good idea.

Flip a coin OP.

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   posted: Oct. 9, 2008 @ 5:05p
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The economy seems terrible right now. If you had the foresight to put everything in treasuries a year ago that's great for you, but if you've been invested up to this point you'd be wise to stay the course. There have been plenty of times in history where the market was down significantly like this. Those times also felt like there was no end in sight. Our economy is quite resilient and things have a way of correcting themselves (excess on the upside and downside). Emotions have clearly taken over and this will pass.

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   posted: Oct. 9, 2008 @ 5:08p
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Why make things so complicate? I give you a simple answer:
If you can correctly predict that the market is going to drop, sell.
If you can correctly predict that the market is going to rise, buy.
If you are like many of us who couldn't predict the future, then hold on to your stocks (assume index funds). In the long run, your chance of getting higher return with stocks is higher than your chance of getting higher return with cash.

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   posted: Oct. 9, 2008 @ 5:13p
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About 10 months ago, I left my current distributions alone, but did change my future contributions to have 50/50 in between bonds and cash.

I still got hit somewhat, but I probably got more of a glancing blow as a result of this.

As for now, it's probably too late to adjust to all cash. Maybe change your distributions a bit, but you should try to dollar cost average down to give yourself a better chance of making it back.

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   posted: Oct. 9, 2008 @ 5:14p
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Sell low, buy high! Its the new trendy thing to do.

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   posted: Oct. 9, 2008 @ 6:27p
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Awesome advise they gave you. They're all bleeding too. Why not read up on things and manage your money properly?

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