ok, convince me 401 K is still smart choice

**MonkeyMama** · 01-21-2011, 10:05 AM

It's been a good/fine upswing, but the problem is you completely missed it. 2 years ago was an amazing opportunity to buy low. In the long run, we haven't lost anything. (The market has come back and we had ample opportunity to buy low and make big gains). For us, this was the second big stock market loss for us - we graduated college in 1999 - but I appreciated we learned those lessons very young before we had much money. This time didn't matter much since we had a better investing strategy. (Broad asset allocation - keep investing through thick and thin. I maybe learned to buy more when the market was low).

If you just invest regularly (& don't sell when things go bad), you should do just fine. Don't put all your money in stocks. Pick a conservative allocation if you can't stomach a large stock portfolio. 50/50 stocks/bonds is better than selling low and buying high.

**bjl584** · 01-21-2011, 10:09 AM

Mine is worth more than it ever has. I have completely recovered all of my loses from the crash and am up about 20% on top of it.

Two of the most compelling arguments for a 401K that I have seen are:

1) If there is a company match, this is essentially free money and an instant return on your investment.

2) The more you contribute, the lower your taxable income (to a point) which is a definite plus at tax time.

**wrk4lvg** · 01-21-2011, 10:10 AM

Was up 12% 2 years ago. 19.6% last year. Looking up already for 11' =)

**thomsoad** · 01-21-2011, 10:24 AM

I have more in it now then ever before. Market goes up and down my friend. Best thing is to invest in it and dont really look at it except maybe 2X a year (maximum) and for GODS sakes ... STOP WATCHING CNBC!!

I honestly dont know what tell. If you are too scared to invest in the stockmarket then invest in the bond market... but thats and even bigger risk cuz it doesnt even match inflation. You could invest in gold since its skyrocketing .. but then you gotta worry about a crash (think .com and housing).

**LivingAlmostLarge** · 01-21-2011, 10:42 AM

DH started in 2006 with his 401k, maxing out contributions each year. And standard allocation. also maybe $5k 2005, and now it's up to $135k? well worth the investment.

**cicy33** · 01-21-2011, 10:58 AM

Originally posted by MonkeyMama View Post

It's been a good/fine upswing, but the problem is you completely missed it. 2 years ago was an amazing opportunity to buy low. In the long run, we haven't lost anything. (The market has come back and we had ample opportunity to buy low and make big gains). For us, this was the second big stock market loss for us - we graduated college in 1999 - but I appreciated we learned those lessons very young before we had much money. This time didn't matter much since we had a better investing strategy. (Broad asset allocation - keep investing through thick and thin. I maybe learned to buy more when the market was low).

If you just invest regularly (& don't sell when things go bad), you should do just fine. Don't put all your money in stocks. Pick a conservative allocation if you can't stomach a large stock portfolio. 50/50 stocks/bonds is better than selling low and buying high.

All very interesting arguments. may reconsider this year. in response to this post. I wouldn't have had anything left to invest. I had only been at my job for 2 years and so had very little in it and saw over a 1/3 drop within a very short time and that was at the beginning of the "crash" I had left me job at the very beginning of it. so there would not have been any new money to help save me.

**GREENBACK** · 01-21-2011, 11:04 AM

You're probably realizing it now but getting out was the worst possible move. I think you will find that everyone who stayed in and rebalanced accordingly has experienced tremendous gains in the recovery. If you have no risk tolerance at all then don't invest because if you pull money out during downturns you only lose that much more and markets are a roller coaster ride even in the best of times.

**EEinNJ** · 01-21-2011, 11:09 AM

I don't know how old you are, but it sounds like you're relatively new to the workforce and just getting started with retirement investing. Try to think long term! Even if you have (only ) 20 years to retirement, that's plenty of time to make a lot of money even with the inevitability of bear markets and corrections. There have been long periods of time when equities didn't perform well, and times when everything went down 20-40%. The opposite is true, too, and you'll be kicking yourself if the market doubles in the next 5 years.

You have to be in it to win it, and accept that there's going to be bumps along the way.

**disneysteve** · 01-21-2011, 11:58 AM

Timing the market doesn't work.
Time in the market does work.

You can't make long-term investment decisions based on short-term performance numbers. Yes, I lost tens of thousands of dollars in my portfolio in the market correction a couple of years ago. Today, my portfolio is worth more than it has ever been worth. Not only didn't I cash out but I continued to add to my holdings every single month with auto-investment plans and dollar cost averaging.

If you are somewhat risk averse, don't go all stock. 60/40 or 50/50 is a nice mix that will allow you to benefit from growth without having the same degree of volatility that you would see with an 80/20 or 90/10 allocation.

**jpg7n16** · 01-21-2011, 01:09 PM

Originally posted by cicy33 View Post

I believe sometime back I had mentioned that when I left my previous job I cashed out my 401K due to the market crashing and me watching my piddly 2000 shrinking fast! okay, so fast forward 2 years later. I have a new job that later this year I will be eligible to contribute to a 401K. the company does a profit sharing. so either way they contribute to mine even if I don't. My thoughts are this.

I am still very gunshy due to the crash a couple years ago. that was my first experience with the stock market and obviously not a good one! My questions are aimed more at people who did lose money then. Are you seeing a good upswing now or is a slow, painful rebuilding? Can I invest in a "safe" way so as not to lose any or much at all? It is ironic I will admit that I love to gamble but for some reason I am a little wary of these 401k's. I don't make enough for the taxable income issue to come into play.

So wait, is your question about the 401k account itself? Or about investing in the stock market?

What would you rather do instead? Invest in a Roth? You'd still have all the swings of the market.

Your problem isn't with the 401k, it's with the stock market. Those are two separate subjects.

The 401k decision is usually a pure tax decision. If you don't make enough for taxable income to come into play, you're likely looking at investing in a Roth instead.

But then you'll need to determine what you invest that Roth money in. I'd still recommend stocks, but for you I'd put more in bonds than you should. Say normal was 85/15, I'd suggest 70/30 for you.

**cicy33** · 01-22-2011, 06:55 AM

Originally posted by jpg7n16 View Post

So wait, is your question about the 401k account itself? Or about investing in the stock market?

What would you rather do instead? Invest in a Roth? You'd still have all the swings of the market.

Your problem isn't with the 401k, it's with the stock market. Those are two separate subjects.

The 401k decision is usually a pure tax decision. If you don't make enough for taxable income to come into play, you're likely looking at investing in a Roth instead.

But then you'll need to determine what you invest that Roth money in. I'd still recommend stocks, but for you I'd put more in bonds than you should. Say normal was 85/15, I'd suggest 70/30 for you.

Aren't they pretty much one and the same? I mean true I am not picking the stocks to buy but the company that manages the 401K is. So no matter how you look at it, isn't it still the stock market?

I don't know how old you are, but it sounds like you're relatively new to the workforce and just getting started with retirement investing. Try to think long term! Even if you have (only ) 20 years to retirement, that's plenty of time to make a lot of money even with the inevitability of bear markets and corrections. There have been long periods of time when equities didn't perform well, and times when everything went down 20-40%. The opposite is true, too, and you'll be kicking yourself if the market doubles in the next 5 years.

You have to be in it to win it, and accept that there's going to be bumps along the way.

actually I am 43. I am not new to the workforce, only new to companies that actually offer good benefits. I live in a relatively small area so there aren't that many that do around here and I was fortunate enough to find one that offers a profit sharing versus me just investing.

**cicy33** · 01-22-2011, 07:01 AM

Originally posted by GREENBACK View Post

You're probably realizing it now but getting out was the worst possible move. I think you will find that everyone who stayed in and rebalanced accordingly has experienced tremendous gains in the recovery. If you have no risk tolerance at all then don't invest because if you pull money out during downturns you only lose that much more and markets are a roller coaster ride even in the best of times.

Actually I still believe that I made the right choice then. I did it at the very beginning of the crash. even before the serious issues with the car place. I had so little in the account anyway. I feel that if I had waited it out I might have had $100 total in my account if I was lucky. perhaps none. I literally saw my account drop by a third between quarters. what I mean by that is this. my company at the time sent me a statement every quarter. from one to the next received is where I saw the drop. My friends around me of course lost more cuz they had more. and based upon what happened after I got out, it was the right choice. Now, however, I am back in a job that does offer this and I feel the economy is more stable though not better, and that is why I am asking if the ones that lost have seen a substantial increase or just piddling. It will actually give me a history on what can happen in a couple years from really bad to not so bad. I intend to work here for some time and feel that it could benefit me to contribute. Keep in mind I don't have to, I will still receive the profit sharing. and for the one that listed the taxable income issue. Again, that is not an issue for me. I don't make more than 24,000 a year right now. so lowering my taxable income is not a huge incentive for me. perhaps if I earned closer to 40,000 it might be.

**cicy33** · 01-22-2011, 07:03 AM

Originally posted by thomsoad View Post

I have more in it now then ever before. Market goes up and down my friend. Best thing is to invest in it and dont really look at it except maybe 2X a year (maximum) and for GODS sakes ... STOP WATCHING CNBC!!

I honestly dont know what tell. If you are too scared to invest in the stockmarket then invest in the bond market... but thats and even bigger risk cuz it doesnt even match inflation. You could invest in gold since its skyrocketing .. but then you gotta worry about a crash (think .com and housing).

I don't watch CNBC. I rarely even watch the news. too depressing! I am not scared of the stockmarket, I am just more cautious of not having actual control of what I am doing with my money.

**Snodog** · 01-22-2011, 07:05 AM

Originally posted by cicy33 View Post

It is ironic I will admit that I love to gamble but for some reason I am a little wary of these 401k's.

That is funny because I'm just the opposite.

Our 401k's/IRA's are worth over twice what they were on Oct 2007 when the crash began. Granted we were throwing money at them like crazy during the downturn. I actually wished the market would've stayed down for longer so I could've bought more cheap stocks. If you are risk adverse do like DisneySteve said and just add more bonds until you feel comfortable with the volatility.

By the way I am 62% stocks, 38% bonds.

ok, convince me 401 K is still smart choice