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How to handle 401K Stocks and the Fiscal Cliff
Posted on 11/24/12 at 11:43 am
Posted on 11/24/12 at 11:43 am
So most of my 401K is in stocks. Should I move the money to something safer until we see what happens with the fiscal cliff or just let it ride ?
I am 38. I have a long way to go to retirement.
I am 38. I have a long way to go to retirement.
This post was edited on 11/24/12 at 11:50 am
6
Posted on 11/24/12 at 1:06 pm to SG_Geaux
ETF's and mutual funds with low expense ratio. T Rowe Price or vanguard offer some good ones.
Posted on 11/24/12 at 1:24 pm to Paul Allen
quote:
ETF's and mutual funds with low expense ratio.
Not quite what the OP was asking, but it's still solid advice.
Posted on 11/24/12 at 1:44 pm to SG_Geaux
I'd ride it out. I'm optimistic that republicans in congress will take the message to heart from the election and end their obstructionism. I don't think they're going to try to hold the country hostage again.
With much of the uncertainty gone from the political landscape I can see the economy heading for a sustained recovery. The Dow has doubled in the last four years from its 2008 low point but it still hasn't recovered to its 2007 high of 14,000. I think we'll surpass that early next year.
With much of the uncertainty gone from the political landscape I can see the economy heading for a sustained recovery. The Dow has doubled in the last four years from its 2008 low point but it still hasn't recovered to its 2007 high of 14,000. I think we'll surpass that early next year.
This post was edited on 11/24/12 at 1:45 pm
Posted on 11/24/12 at 3:14 pm to Layabout
This post was edited on 11/24/12 at 3:15 pm
Posted on 11/24/12 at 3:16 pm to SG_Geaux
The "fiscal cliff" is going to result in inflation so I dont know where you could put your money that would be considered "safe" that would allow you to actually earn money when adjusted for inflation. Real estate is probably the best place to put your money at the moment.
Posted on 11/24/12 at 4:14 pm to lsu480
This money is in a 401k. It has to stay there. I can have that money invested heavily in stocks, like I do now, or something more conservative and less volatile. Much less risk, but much lower return.
This post was edited on 11/24/12 at 4:15 pm
Posted on 11/26/12 at 12:49 pm to SG_Geaux
Depends how much faith you have in our government to get things accomplished in the crunch...
If your 38, and your money is in a 401k, I woudlnt be excessively worried about it. IF we "go off the cliff" the market will take a hit- temporarily until a solution is found. If we can't find a solution well then different story...how quickly that gets priced into the market- IDK.
If you had some control over your allocations you could take hedging strategies, but I'm not going to recommend that if you really arent familiar with the market.
At 38 there is no reason to be out of the market...
If your 38, and your money is in a 401k, I woudlnt be excessively worried about it. IF we "go off the cliff" the market will take a hit- temporarily until a solution is found. If we can't find a solution well then different story...how quickly that gets priced into the market- IDK.
If you had some control over your allocations you could take hedging strategies, but I'm not going to recommend that if you really arent familiar with the market.
At 38 there is no reason to be out of the market...
Posted on 11/26/12 at 1:04 pm to greenhead11
I always see people pulling their 401k into and out of cash at 45-60 years old and it hurts MY stomach. I have no idea how those people can do it.
Even in my mid 20's I don't have the guts to go in and out of the market and I have less than 10% of the assets that they own.
Even in my mid 20's I don't have the guts to go in and out of the market and I have less than 10% of the assets that they own.
Posted on 11/26/12 at 3:54 pm to SG_Geaux
You could consider allocating a larger percentage of current equity holdings into high quality, lower volatility large cap equity depending on what your plan offers, make small shifts towards money market or stable value funds, or put all new contributions into money market or stable value funds then buy equity when you feel more comfortable. The road map differs for everyone, some hate the unknown and potential risk, others thrive on it. I'll be 50 next year and already won the money game, so I am 35% equity, plus another 15% in real estate, etc, but I have been at those numbers for roughly 6 months. In 2009 I was 75% equity in some highly volatile sectors, if there is a big draw down I will take more risk. My outlook is to minimize downside while still earning a reasonable return for the risk taken. Emerging markets still look like a decent opportunity to me based on valuation. There are also a shite load of equity income/dividend stocks held in tax advantaged plans, so I would not overreact to the media onslaught of "ONOZ" everyone is going to sell income producing equity holdings, either.
Posted on 11/27/12 at 1:07 am to tirebiter
quote:
Emerging markets still look like a decent opportunity to me based on valuation.
China is down right cheap... I've been a big china proponent - albeit cautiously now for a years and people have written me off. Just think about the emerging middle class and how nouveau riche spend money when they get it. Consumerism.
quote:
I'll be 50 next year and already won the money game
nice. I seem to be working in the opposite direction in achieving this goal. 
Posted on 11/27/12 at 9:52 am to SG_Geaux
quote:
Should I move the money to something safer until we see what happens with the fiscal cliff or just let it ride ?
Nobody can predict what the market will do. Even if you knew exactly what the fiscal cliff deal would be, you cannot know how the market will react.
Come up with an asset allocation plan and stick to it. Ignore all the noise.
The most basic plan is to to make your age your allocation to bonds, so for you 38% bonds, 62% stocks. Re-balance every year.
Posted on 11/27/12 at 12:23 pm to PhillyTide
quote:
so for you 38% bonds, 62% stocks
At 38, given our current state of affairs, I would NOT have 38% in bonds...Way too high of an allocation- that is not as safe as one may first think.
If you have the option, put your bond money in Emerging markets corporates and sovereigns, and Muni's here. Avoid treasuries.
Posted on 11/27/12 at 12:36 pm to PhillyTide
quote:
The most basic plan is to to make your age your allocation to bonds
Probably my least favorite rule of thrumb.
The only bonds I would be holding right now would be short duration (less than 2 years) or floaters
Posted on 11/27/12 at 1:09 pm to TheHiddenFlask
quote:
The only bonds I would be holding right now would be short duration (less than 2 years) or floaters
Everyone's scenarios and individual situations differ. I am still liking my guaranteed tax deferred 4% EE's maturing over the next 5-10 years, Ibonds with stated rates of 2-3% + semi-annual CPI-U adjustments, and TIPS with good coupons maturing over the next 5-8 yrs bought back in late 2008. The 30-yr TIPS with 2.12% coupon might be jettisoned soon though. Never underestimate the buying power of cash in a liquidation scenario.
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