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Time to Change My 401K Investment Direction?
Posted on 8/25/15 at 12:23 pm
Posted on 8/25/15 at 12:23 pm
So I've been pumping money in my 401K for the past 3 years, and have been doing so under Merril Lynch's "aggressive model". I used to check it frequently, but havent lately, until today. Its currently down 8% YTD. Ouch. While the market has rebounded today, most folks expect a correction, with some stating this is the start. Should I go ahead and swap my investment direction into a more conservative or moderate model they offer? Or stick with the aggressive model? Aggressive model means 100% of funds are in stocks and equities, while the moderate model is 71% stocks/23% bonds/6% money market, and the conservative model is 33% stock/47%bonds/20%money market. I am only 26, so I have time to make up some loses, just not sure I want to watch my company match (4% for 4% program) totally disappear in the coming months. Thanks for any help.
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Posted on 8/25/15 at 12:26 pm to mkibod1
Why would you sell off stocks and go conservative before a rebound? This is your retirement account. If anything you should be adding more as the market goes lower to get some less expensive share.
Posted on 8/25/15 at 12:28 pm to mkibod1
quote:
I am only 26, so I have time to make up some loses, just not sure I want to watch my company match (4% for 4% program) totally disappear in the coming months. Thanks for any help.
Short answer: no leave it. Only idiots try to time the market with their 401k
Posted on 8/25/15 at 12:28 pm to mkibod1
stay aggressive non-stop until you are about 5 years from retirement.
Posted on 8/25/15 at 12:34 pm to mkibod1
If you're going to change your investment elections, do so based on the long-term picture and not fear of the short-term. What kind of portfolio balance would you be comfortable with for the next 5-10
years (or whatever timescale), not over the next few months. If a larger bond allocation will make you feel more comfortable and less inclined to overreact the next time your investment value drops a bit, then that might be your best bet.
Your 4% company match won't disappear because it was used to purchase mutual fund shares. Those shares may have dropped in value, but you will only realize that drop by selling at the lower value.
years (or whatever timescale), not over the next few months. If a larger bond allocation will make you feel more comfortable and less inclined to overreact the next time your investment value drops a bit, then that might be your best bet.
Your 4% company match won't disappear because it was used to purchase mutual fund shares. Those shares may have dropped in value, but you will only realize that drop by selling at the lower value.
Posted on 8/25/15 at 12:35 pm to SouthOfSouth
quote:
If anything you should be adding more as the market goes lower to get some less expensive share.
Thats what Im doing with my side play money accounts. Ive been dumping spare change in my Scottrade and Robinhood accounts over the past few months, and bought a little bit yesterday morning, but am holding out for lower lows to take big positions. With my 401K, I would ideally like to play it a little more conservative considering I do not have immediate access to change its direction like I can with my side accounts. I have always thought play aggressive and take what comes, but it did hurt seeing my small account is down a grand on the year haha Sounds like I should just stay the course like I had always planned. Thanks for the reassurance and input all!
Posted on 8/25/15 at 2:57 pm to mkibod1
No way. That's literally the definition of buying high and selling low. Only reason to maybe consider this would be if you are rolling over soon in which you cannot hold onto the exact investments. Even then, you can always just keep the existing 401k where it is.
Posted on 8/25/15 at 2:59 pm to mkibod1
quote:
I am only 26, so I have time to make up some loses
You've answered your own question. Go aggressive now, and go aggressive for another 25 or 30 years.
Know what the Dow Jones was at 25 years ago? About 2600. It's up 604% as of right now. I'd say that's a pretty good return.
Posted on 8/25/15 at 3:05 pm to mkibod1
quote:
Should I go ahead and swap my investment direction into a more conservative or moderate model they offer?
Chasing the needle. Dollar cost averaging will likely solve all these problems within months, not years.
If you're under 40 - worry about this correction ZERO - you will see several more before you retire.
If you're 40 to 50 and this bothers you - you were in too risky of a profile and should reconsider your strategy.
If you're over 50 and are in an aggressive model, I would presume you understood those risks and wouldn't be making this post.
So, you're about 30? You have 30 years to make money. This is one of those opportunties. Have you heard the old axiom "buy low, sell high"? The coming months are going to be an opportunity to "buy low".
Posted on 8/25/15 at 4:40 pm to mkibod1
Moved any my account earnings to T Bills last Sept when the market was 17,500. I had a bad feeling this was coming. A few months ago I felt stupid because my return dropped to 1.5%. I am buying back in when this thing hits bottom 
Posted on 8/25/15 at 5:05 pm to ShermanTxTiger
quote:
Moved any my account earnings to T Bills last Sept when the market was 17,500. I had a bad feeling this was coming. A few months ago I felt stupid because my return dropped to 1.5%. I am buying back in when this thing hits bottom
Good luck guessing when that is.
Posted on 8/25/15 at 5:08 pm to ShermanTxTiger
quote:
I am buying back in when this thing hits bottom
What will the bottom be? I want to look for it too.
Posted on 8/25/15 at 7:23 pm to mkibod1
Never try to catch a falling knife.
Ride it out.
Ride it out.
Posted on 8/26/15 at 3:08 pm to ShermanTxTiger
So Sherman, where, exactly, is that bottom going to be?
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