401k and the "censored" curve

[Vern_in_IL]

First off, what the heck is this "super (drop and bounce back up)" everyone is talking about?

I only got like 80k in 401k, and when the markets dipped in March, I only lost 6k.... one guy at work lost 100k, and moved the rest into less risky investments at the dip! no:no:no

I felt my investments were too conservative, so near the bottom of the (censored) I re-balanced to more midcap and largecap investments, including the SP400midcap...

I'm up 6k this year with only 2k added to the plan.(1k from me and 1k employer match)

What is the opinion on the SP400? it did the "drop and bounce back up" druing March but it is starting to trend down, the all time highs were in January of this year. I feel there is more room to grow, but for the last 6 weeks, weekly losses are occurring.

 

[chemman]

The thing I was taught by a money person early on about investing in the stock market by whatever means - 401(k), mutual funds, etc., is to look at the long haul, and not the short term with the daily ups and downs. Historically, the stock market has gone up as time goes on and time is measured in years, not days, weeks or months. Looking at one's investments on a daily, weekly, or monthly basis can actually drive oneself bonkers.

I agree with you that the all time highs were in January, and that things dropped big time in March, but by the end of this year, things are likely to be on par with the beginning of the year. So, perhaps 2020 will be a flat year overall, but it's likely going to go higher in 2021, higher in 2022, etc.

 

[FordSVTGuy]

Just keep accumulating those shares. When you need it, it’ll be worth more... I’ve been saving in my 401k for just over 20 years and I keep it simple. I did rebalance during the market decline twice this year, but thats not an overly aggressive move, just kind of standard investment stuff. Other than that, I hardly ever look at it or adjust...

 

[Wolf359]

First off, what the heck is this "super (drop and bounce back up)" everyone is talking about?

I only got like 80k in 401k, and when the markets dipped in March, I only lost 6k.... one guy at work lost 100k, and moved the rest into less risky investments at the dip! no:no:no

I felt my investments were too conservative, so near the bottom of the (censored) I re-balanced to more midcap and largecap investments, including the SP400midcap...

I'm up 6k this year with only 2k added to the plan.(1k from me and 1k employer match)

What is the opinion on the SP400? it did the "drop and bounce back up" druing March but it is starting to trend down, the all time highs were in January of this year. I feel there is more room to grow, but for the last 6 weeks, weekly losses are occurring.

Sometimes those are known as head fakes. Market drops and then goes back up.

Not really familiar with the S&P 400, Looking at the 3, 5 and 10 year returns, nothing really exciting, S&P 500 beats it pretty badly in the 3, 5 year range and the 10 year it's still up a couple extra points. So I don't really see the point. If anything, I'd chase a Nasdaq index fund, that's been beating the S&P 500 for the last 10+ years. A couple other funds I'm in, Fidelity Contrafund and Janus 40 seem to track the Nasdaq more as they're up over 20% year to date whereas the S&P 500 is up only about 5.88% year to date.

 

[samven]

I think you got a triple whammy this year. The thing we dont talk about, the election uncertainty and a price to earning ratio that is unsustainable about 25:1. It used to be if it got over 15:1 or so people got skiddish. The unemployment bonus and recovery money propped everything up for awhile but that is starting to fade now.

 

[Wolf359]

I think you got a triple whammy this year. The thing we dont talk about, the election uncertainty and a price to earning ratio that is unsustainable about 25:1. It used to be if it got over 15:1 or so people got skiddish. The unemployment bonus and recovery money propped everything up for awhile but that is starting to fade now.

It remains to be seen when that will kick in. When a PE ratio is 15, that means that every dollar is earning about 6.7%, when you're down to 25, that's about 4%. When inflation is low, 4% isn't bad. Should be low for a while. The end result doesn't have to be crash, you have various companies that were high flyers and then never really crashed, but just went sideways for years while their earnings slowly worked down their PE ratio. You're also assuming no new stimulus. Basically you've got a lot of assumption built into your future whammy. If they come true, it's possible for a whammy. But it's hard predicting the future. I'm just going to say we shall see, I was never issued a working crystal ball.

 

[samven]

That fine if your working and still putting in but I am retired and withdrawing and cant assume that things will be fine. I have to look at what I consider most probable and what time and many crashes during my working life taught me.

 

[toneydoc]

Markets over many years go up by about 7% or so over the Long Haul
The money your employer matches is great and you should get as much match as you can. It is almost like free money
A rule of thumb out there is to take 100 and subtract your age. That number is the % of stocks or mutual funds you should have from your money you have invested
The rest should be in bonds, money market, CDs etc
Again that is a rule of thumb
Now what you invest in with your stock and funds can vary greatly
You should have some balance with that money
I like a company called Fidelity. They have many mutual funds depending on your likes
Their website gives you tremendous amt of information
They will advise you but you have to the decisions
There are other reputable companies as well
And timing the market, hah. Nobody can predict the tops and bottoms
You are in for the long haul if you are thinking correctly

 

[mrsilv04]

A rule of thumb out there is to take 100 and subtract your age. That number is the % of stocks or mutual funds you should have from your money you have invested
The rest should be in bonds, money market, CDs etc

So that means at this time last month, I was invested as if I were only 15 years old...

 

[AZjeff]

So that means at this time last month, I was invested as if I were only 15 years old...

And possibly you have more risk tolerance for your age than the experts recommend, and/or the money you have in stocks isn't critical for near term living expenses.

I have low risk tolerance so I'm content with slower safer growth. Even more so with retirement rapidly approaching.

 

[ironman_gq]

In the long run you're way better off just riding out the dips. I lost 20% in February, gained all that back and another 35% since. Lots of people cashed out at the bottom and are hurting now.

 

[csandste]

I'd either go with a total stock market, S&P 500 or target fund to your employer match, then max out a Roth with similar investments. I maxed a 457 for decades and my taxes have tripled since retirement. Always use index funds with less than ten basis point expenses. You can get Vanguard or Schwab indexes for well under that or Fidelity 500 for free. The difference between those three over a decade will get you a couple of Big Macs. Above all don't be like your friend, panic and go to cash when you're young. The average investor misses the index because they chicken out.

 

[supton]

I haven't figured out how I want to have my risk--I figure, I am 25 years out from retirement, so it should be "100%" high risk. But when should I throttle back? Hard to say. I suspect around 10 years out from retirement I will want to start tapering down in risk.

I do have most of mine in a retirement target index fund, so it will do that automatically--but I also am behind and might need to change funds when they start to go conservative, if I think the need is there.

Now if I get lucky and find that I have more money than I "need" for retirement (as in, a barest minimum to take me to the grave) then maybe I'll not need to lock up too much into safe accounts. Having my money make money for me... that would be nice.

Right now I try not to look at my account. Market goes up, market goes down. As long as I do my bit and put money, it'll simply grow for me. In the new year I should try to split between Roth and 401k, I've been leery of doing a Roth as I fear I'd wind up treating it like a bank account instead (plus the tax benefit of the 401k is nice in the here and now).

 

[PimTac]

Retirement is different for everyone and hard questions need to be asked. Most of the financial institutions have services that can help you with the process. What is your life expectancy? Family history? Any current diseases? What are your needs and wishes for the money? Do you want to fund education for grandkids or leave inheritance?

There are more questions obviously but what all this will do is show you the reality of your nest egg. Take in account for other sources of income plus your predicted outlays. Will you downsize your home? Build a new one? Buy a RV ?

Concentrate on your own assets and investments and never mind what others are doing.

 

[SubieRubyRoo]

Remember that since the Fed came into being, it's been a pretty safe bet that every 7-10 years there is a big drop in the markets, so make sure to account for that forecast on when you want to retire. If you're within 2 years or so of retirement, and it coincides with ~ year 7 of a bull market, I'd have the lowest risk possible. However, if there had been a major reset say 3 years ago and you're retiring today, I'd be completely comfortable leaving a good percentage of your investments in higher risk for say another 4 years or so.

On a deeper measure, I wonder if the drops are really a reflection of the market corrections as bankruptcies come into play... since 7 years is the amount of time most bankruptcies are "active", and now you can declare bankruptcy again after the 7-10 year mark, that the underlying big money forces know this and start to cash out a good portion of their investments to solidify their profits? I don't know... but I think about things like that.

 

[Davejam]

The only guarantee is that you cannot time the market. Period.

After that I have no idea what you're talking about.

 

[wpod]

Up $40,000.00 from Oct 2019 down about $20.000.00 from the peak which means nothing until the stocks are sold.

 

[Wolf359]

Remember that since the Fed came into being, it's been a pretty safe bet that every 7-10 years there is a big drop in the markets, so make sure to account for that forecast on when you want to retire. If you're within 2 years or so of retirement, and it coincides with ~ year 7 of a bull market, I'd have the lowest risk possible. However, if there had been a major reset say 3 years ago and you're retiring today, I'd be completely comfortable leaving a good percentage of your investments in higher risk for say another 4 years or so.

On a deeper measure, I wonder if the drops are really a reflection of the market corrections as bankruptcies come into play... since 7 years is the amount of time most bankruptcies are "active", and now you can declare bankruptcy again after the 7-10 year mark, that the underlying big money forces know this and start to cash out a good portion of their investments to solidify their profits? I don't know... but I think about things like that.

The problem with your bet is that you can't really bet on it in terms of the timing. Remember I said that in 1996, they said the market was at a high. It kept going for another 4 years before it crashed and didn't crash til 2000 and not back to 1996 levels. And usually when it bounces back, it does so quickly so if you wait too long, you'll miss the run up, or if you jump in too early, it can continue the ride down longer. The major problem with trying to time the market is that some can call the right time to get out, they're just not any good at getting back in so I believe statistically you're just better off staying in. This last bear market earlier this year was one of the shortest on record.

Asset allocation should happen independent of what the market is actually doing and shouldn't be tied to any kind of market timing.

 

[Dave Hess]

The only guarantee is that you cannot time the market. Period.

After that I have no idea what you're talking about.

You can‘t time the market..... but you can keep your eyes open to the bad economic news.

Ultimately, the Wall Street puppeteers are running the show and calling all the shots.


.

 

[JeffKeryk]

Can I time the market?
Well, there are huge supercomputers with tons of data from many sources being programmed by lowly programmers who make $350K per year attempting to do this.

Good luck.