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10/06/2008 09:33:58 PM · #1
Has your 401K been leaking money like a sieve lately?

In the process of rolling over an old 401K plan into my new one, I had a chance to chat with an investment manager about the recent economic problems and their effects on 401K plans. She told me that many investors are loosing huge amounts of money from their 401K plans lately. She mentioned one man that she spoke with recently that had lost over $20K in two days time. Many others are doing even worse than that. She said that a large number of people simply pay no attention to their 401K plan, assuming that their money is safely tucked away and will be there when they need it. Unfortunately, most cookie-cutter 401K plans have a relatively low rate of return even during the best of times. During the bad times, like now, the can bleed you dry before you even know you're hurt.

So, how about it? Are you paying attention, or are you happily going broke?

10/06/2008 09:38:54 PM · #2
I'm trying to find a beer to cry in. $20k in two days? Ha. I've had a couple days this Fall where I lost (or gained... but mostly lost, LOL) into six figures.
Honestly, it is not worth really fretting about. It will be what it will be.
10/06/2008 09:40:21 PM · #3
I put 50% into 3% guaranteed interest. The other half is tanking just like everyone else.
10/06/2008 09:55:10 PM · #4
Wow, I'm sorry to hear that Fritz. Do you manage your own portfolio?

Have you considered switching all of your assets into money market funds or CDs, at least for the short term?

Same question to you Tate. You moved 50%. Why not all of it?

Don't get me wrong guys, I'm an idiot when it comes to finance so don't this as any type of financial advice. I just wonder what your thoughts are on this.

10/06/2008 10:45:46 PM · #5
With the stock market falling ... now is the time to BUY not sell! Remember, buy low, sell high. If you're selling now you'll never get it back.

(heh... I'm not a pro, I don't even play one on TV, but that's my opinion and I'm sticking with it)
10/06/2008 10:46:59 PM · #6
I just gained 223 million dollars. I am retiring tormorrow morning and I am going to roam the earth and be a bum for the rest of my life......
:P
10/06/2008 10:49:29 PM · #7
Originally posted by Mick:


So, how about it? Are you paying attention, or are you happily going broke?


I cashed out about a year ago and bought pork bellies.
10/06/2008 10:50:14 PM · #8
Originally posted by JaimeVinas:

I just gained 223 million dollars. I am retiring tormorrow morning and I am going to roam the earth and be a bum for the rest of my life......
:P


As my life proves, you don't need 223 million dollars to be a bum.....
10/06/2008 10:56:04 PM · #9
Originally posted by fir3bird:

Originally posted by Mick:


So, how about it? Are you paying attention, or are you happily going broke?


I cashed out about a year ago and bought pork bellies.

A diet limited to bacon can't be too healthy. Tasty yes, but not healthy. You should diversify and get some beer too.
10/06/2008 10:57:46 PM · #10
Based on my balance over the summer, I've probably lost somewhere above $25K. Don't know exactly, haven't checked.

But I'm ignoring the market. I don't retire for 25 years. Today's changes are irrelevant, and pulling out now would mean betting a lot of money that I know the precise moment when it'll rebound.

Message edited by author 2008-10-06 22:58:03.
10/06/2008 10:58:58 PM · #11
Originally posted by dwterry:

With the stock market falling ... now is the time to BUY not sell! Remember, buy low, sell high. If you're selling now you'll never get it back.

(heh... I'm not a pro, I don't even play one on TV, but that's my opinion and I'm sticking with it)

I think the idea is to buy just before it starts going back up. If you buy while it's still suffering major losses, then you're buying the losses.

10/06/2008 11:06:03 PM · #12
Originally posted by Mick:


A diet limited to bacon can't be too healthy. Tasty yes, but not healthy. You should diversify and get some beer too.


Hell, I own 25% interest in the beer that made Mel Famey walkus. Is that enuf?
10/06/2008 11:14:09 PM · #13
Originally posted by Mick:

Originally posted by dwterry:

With the stock market falling ... now is the time to BUY not sell! Remember, buy low, sell high. If you're selling now you'll never get it back.

(heh... I'm not a pro, I don't even play one on TV, but that's my opinion and I'm sticking with it)

I think the idea is to buy just before it starts going back up. If you buy while it's still suffering major losses, then you're buying the losses.


Since you can't know when it will bottom out ... my idea would be to keep buying, all the way down. The closer you get to the bottom the more money you make. But even on the way down, the money being invested will earn a significant return when it comes back up.


10/06/2008 11:15:02 PM · #14
Originally posted by Mick:

Originally posted by dwterry:

With the stock market falling ... now is the time to BUY not sell! Remember, buy low, sell high. If you're selling now you'll never get it back.

(heh... I'm not a pro, I don't even play one on TV, but that's my opinion and I'm sticking with it)

I think the idea is to buy just before it starts going back up. If you buy while it's still suffering major losses, then you're buying the losses.


If you can do that reliably, you're smarter than everyone who's ever owned any investment, ever. Whereas if you merely think you can, you stand a much greater chance of missing a whole bunch of gains.
10/06/2008 11:20:11 PM · #15
Originally posted by dwterry:

Since you can't know when it will bottom out ... my idea would be to keep buying, all the way down. The closer you get to the bottom the more money you make. But even on the way down, the money being invested will earn a significant return when it comes back up.


Bingo. Otherwise known as dollar-cost averaging, or put simply, invest the same amount on a regular schedule. You'll buy more shares when they're cheaper and fewer when they cost more.

Note I'm not suggesting this is necessarily a good strategy when you need the money in the next few years. When we sold our old house in 2006, we put the money into a money market fund because we planned to use it for an addition on our new house.

But if you're decades from retirement, just keep to the same schedule.
10/06/2008 11:26:45 PM · #16
Originally posted by dwterry:

With the stock market falling ... now is the time to BUY not sell! Remember, buy low, sell high. If you're selling now you'll never get it back.

(heh... I'm not a pro, I don't even play one on TV, but that's my opinion and I'm sticking with it)


He's right. Buy when there's blood in the streets...and yes there's plenty of blood in the streets.

Apple (AAPL) closed at $98.14 and it's 52 week high was $202. Not a bad bargain. Adobe is at $30,71 down from 48.47 another one to look at. Buy companies that you like.

JNJ (Johnson and Johnson) a steady horse and remember we're all gonna need diapers at one point or another.

If you have money in a Roth IRA that you can't touch and won't need for 15-25 years it might be wise to shift a few bucks into some of those bargain prices

Message edited by author 2008-10-06 23:33:43.
10/07/2008 01:02:24 AM · #17
Originally posted by dwterry:

Since you can't know when it will bottom out ... my idea would be to keep buying, all the way down. The closer you get to the bottom the more money you make. But even on the way down, the money being invested will earn a significant return when it comes back up.

Not if you loose it all before the market turns back up.

Most 401K plans have several different types of funds that you can choose to invest in. They each have different costs and rates of return. If you have your money invested in funds that are loosing 10%, 20%, or even 30% or more, then it only makes sense to move your money into safer investments.

Let's say you have $100,000 invested in a 401K plan. And let's say the funds that you're invested in are reducing your account balance by $3000-$5000 per day. How exactly are you going to be "buying low and selling high" with a "let it ride" strategy like that? Do you honestly think it's smarter to leave your money in funds that are doing that badly, instead of moving it temporarily into safer investments? Most investment advisers would disagree.

10/07/2008 01:13:21 AM · #18
Originally posted by levyj413:

If you can do that reliably, you're smarter than everyone who's ever owned any investment, ever. Whereas if you merely think you can, you stand a much greater chance of missing a whole bunch of gains.

It doesn't take a financial genius to know when the economy is in the toilet for an extended period of time. Just listen to the news occasionally. If the funds in your 401K are all averaging -30% or more, that's probably a good sign that it's time to make some changes.
10/07/2008 01:47:39 AM · #19
Originally posted by Mick:

Do you honestly think it's smarter to leave your money in funds that are doing that badly, instead of moving it temporarily into safer investments? Most investment advisers would disagree.


Not the ones I read (I'm certainly not original in my thinking!), who repeatedly say that moving around just makes you likely to miss the recovery, locking in your losses. How do you know when "temporary" is over and it's time to move back?

The ones that drop big also gain big, and the ones that drop small also gain small. So by moving to a small gainer, you give up your chance to recover. Unless you know exactly when to get back in, which makes you someone who shouldn't waste time arguing on an Internet chat board, because you could be making billions with that talent. :) Again, I'm talking about my retirement fund, which I won't touch for 25 years.

If you need the money soon, then sure, take it out. But in that case, it shouldn't have been in such volatile securities to begin with.

But don't take my (or David's) word for it, look at some actual examples.

Originally posted by the article linked above, emphasis added:


It's not timing the market that's key, but rather the amount of time you're in the market. Using data from Bloomberg, American Century Investments looked at the period from 1990 to 2005 and found that a $10,000 investment would have grown to $51,354 had you just sat tight from beginning to end. However, if you had missed the best 10 days in that 15-year period, your returns would have dwindled to $31,994; if you had missed the best 30 days, you'd be looking at a mere $15,730.

Nobel laureate William Sharpe found that market timers must be right an incredible 82% of the time just to match the returns realized by buy-and-hold investors.


Message edited by author 2008-10-07 02:02:47.
10/07/2008 02:38:52 AM · #20
My 401 K is exactly that $4.01 now. Thank you George Bush.
10/07/2008 03:35:44 AM · #21
Originally posted by levyj413:

Originally posted by Mick:

Do you honestly think it's smarter to leave your money in funds that are doing that badly, instead of moving it temporarily into safer investments? Most investment advisers would disagree.


Not the ones I read (I'm certainly not original in my thinking!), who repeatedly say that moving around just makes you likely to miss the recovery, locking in your losses. How do you know when "temporary" is over and it's time to move back?

The ones that drop big also gain big, and the ones that drop small also gain small. So by moving to a small gainer, you give up your chance to recover. Unless you know exactly when to get back in, which makes you someone who shouldn't waste time arguing on an Internet chat board, because you could be making billions with that talent. :) Again, I'm talking about my retirement fund, which I won't touch for 25 years.

If you need the money soon, then sure, take it out. But in that case, it shouldn't have been in such volatile securities to begin with.

But don't take my (or David's) word for it, look at some actual examples.

Originally posted by the article linked above, emphasis added:


It's not timing the market that's key, but rather the amount of time you're in the market. Using data from Bloomberg, American Century Investments looked at the period from 1990 to 2005 and found that a $10,000 investment would have grown to $51,354 had you just sat tight from beginning to end. However, if you had missed the best 10 days in that 15-year period, your returns would have dwindled to $31,994; if you had missed the best 30 days, you'd be looking at a mere $15,730.

Nobel laureate William Sharpe found that market timers must be right an incredible 82% of the time just to match the returns realized by buy-and-hold investors.

You keep mentioning taking money out, and that's not what I said at all. I talked about moving it, not taking it out. And I didn't say anything about moving it around constantly either. I said move it temporarily into safer investments within your plan. It's simple math. Are you better off with your money in a fund that's earning 1-3%, or one that's loosing 15-30%? If you "sit tight" with your $10,000 invested in funds that are loosing you $3000 per day, then you'll be broke in less than a week. IOW, I'm not talking about bouncing around, constantly chasing the highest return. What I'm talking about is damage control during a serious and lengthy down turn in the economy.

Anyway, I asked the question, and you gave me your opinion. I'm satisfied. Thanks!

10/07/2008 03:42:47 AM · #22
Originally posted by levyj413:

Originally posted by Mick:

Do you honestly think it's smarter to leave your money in funds that are doing that badly, instead of moving it temporarily into safer investments? Most investment advisers would disagree.


Not the ones I read (I'm certainly not original in my thinking!), who repeatedly say that moving around just makes you likely to miss the recovery, locking in your losses. How do you know when "temporary" is over and it's time to move back?

The ones that drop big also gain big, and the ones that drop small also gain small. So by moving to a small gainer, you give up your chance to recover. Unless you know exactly when to get back in, which makes you someone who shouldn't waste time arguing on an Internet chat board, because you could be making billions with that talent. :) Again, I'm talking about my retirement fund, which I won't touch for 25 years.

If you need the money soon, then sure, take it out. But in that case, it shouldn't have been in such volatile securities to begin with.

But don't take my (or David's) word for it, look at some actual examples.

Originally posted by the article linked above, emphasis added:


It's not timing the market that's key, but rather the amount of time you're in the market. Using data from Bloomberg, American Century Investments looked at the period from 1990 to 2005 and found that a $10,000 investment would have grown to $51,354 had you just sat tight from beginning to end. However, if you had missed the best 10 days in that 15-year period, your returns would have dwindled to $31,994; if you had missed the best 30 days, you'd be looking at a mere $15,730.

Nobel laureate William Sharpe found that market timers must be right an incredible 82% of the time just to match the returns realized by buy-and-hold investors.


That was a really good article - thanks for posting. I was getting a little nervous watching my 401k decrease (actually hemorage) the past few weeks, but I think I'll try to stick it out.
10/07/2008 05:19:22 AM · #23
Originally posted by jtf6agent:

My 401 K is exactly that $4.01 now. Thank you George Bush.


JESUS! Always! Better do some reading on what happened here.
For me...just like a good horse, great motorcycle or a great woman. Ride her out! YEEEHAAAAA!!!!
10/07/2008 07:17:06 AM · #24
i seem to have misplaced 100k somewhere .. hvae you seen it?
10/07/2008 07:19:52 AM · #25
Originally posted by JaimeVinas:

I just gained 223 million dollars. I am retiring tormorrow morning and I am going to roam the earth and be a bum for the rest of my life......
:P


Don't forget your camera...
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