401k and the US Economy ...

[Bonedry]

I am 33 years old and have been contributing tirelessly to my 401k for the last decade or so. Currently I have just over $110k in my 401k account with no other savings whatsoever. I like the idea of maximizing my 401k contributions each year because frankly, any monies I have easy access to would be carelessly spent on hookers and blow...

I am convinced that within the next 5 years, the US economy - particularly the US dollar - is going to absolutely tank in value, if not collapse.

My 401k is ALL of the savings I currently hold, and want do what I can to at least preserve its value, if not continue to profit.


My Question:


Most all of the funds in my prospectus are US stocks and bonds, but there is ONE fund - American Funds Europacific Growth R4 (REREX) which claims to have at LEAST 80% of its portfolio in Europe stocks.

I know Europe is facing similar economic hardships, but I strongly feel that the US market is headed for major disaster, and any shortcomings in the European markets will pale in comparison.

Should I move all of my 401k money into the Europe fund until I feel that the calamity is over?


Thoughts?

[bjl584]

I would start to diversify your own portfolio. A more of a bigger picture approach than simply tinkering with your 401K allocation. You should open up a personal brokerage account and a Roth IRA in addition to your 401K. Having every penny to your name locked away in an account that you can't access for 30 some years will do you no good today. It's great that you have six figures in your 401K already but you need to hold back some cash for other things in life or you will be forced to finance everything. You need an Emergency Fund, a car fund, money for a house downpayment, the list goes on.

[disneysteve]

Originally Posted by Bonedry

Most all of the funds in my prospectus are US stocks and bonds

Should I move all of my 401k money into the Europe fund until I feel that the calamity is over?

I don't think you should have 100% of your portfolio in US stocks.
I also don't think you should move 100% of your portfolio into European stocks.

Your portfolio should have a diversified asset allocation - US stocks, US bonds, foreign stocks and bonds, perhaps real estate, commodities, cash, etc. And the stocks could be further broken down into small cap, mid cap, large cap, growth, value, etc. Different market sectors and different asset classes perform differently over time so it is important to diversify to smooth your returns over time.

I am not an alarmist. I don't believe our economy is going to collapse. And if I had to bet on if the US or Europe will fare better, I'd go with the US for sure.

Also, keep in mind that most large "US" companies do a high percentage of their business outside of the US in our global economy. Iconic American names like Coca-Cola, McDonald's, tech companies, pharmaceutical companies and more might be based in the US but they are almost just as much foreign companies. And the reverse is true, too. Many foreign-based companies depend on the US economy for a significant chunk of their businesses.

[thomsoad]

I would do it but not for the reasons you display. You have 30 years so who cares what anybody thinks will happen in the next five.

Im diversified in US, Europe, and Asia. Plus smaller undeveloped countries as well and I never decided to do foreign investments based on what I thought the US was going to do.

Diversity is the key. Take advantage when you can

[disneysteve]

Originally Posted by thomsoad

I would do it

Diversity is the key. Take advantage when you can

When you say you would do it, do you mean you would put the whole portfolio into Europe or do you mean that you would diversify to include Europe?

[Bonedry]

Thank you all for your replies...

I am re-evaluating where I allocate my 'savings' dollars in the future, but this thread was created to discuss what to do with the money already locked into the 401k plan.

DysneySteve - I was considering 100% in the Europacific fund, as 5% of my portfolio is already in that fund.

Thomsoad, DysneySteve: After some thought I agree with you: diversity is absolutely the key in protecting wealth. I should probably reallocate keeping that in my mind.