Lost money?

[TexasHusker]

I bought a rental right before the bubble and it went down about $50K in value. I'm probably still underwater, but I've gotten about $80K in net rents back after all expenses so it's all good.

I had a 401K at work once with over $500K in Vanguard Energy. There was then an energy slump and it dropped about $250K. In the depth of the slump, my employer changed 401K administrators, and wouldn't you know it, they liquidated all of my vanguard energy because "we don't offer sector funds." Nice timing. Not only did I lose the money, but couldn't ride the next energy bull to get the money back. This event was and is the single most devastating financial event in my lifetime and there isn't a close second.

I decided right then and there that employer sponsored 401K plans were not for me - despite their benefits, other people are holding too many cards.

So when you hear me diss 401K plans, realize I have some serious unpleasant baggage.

[disneysteve]

I had a 401K at work once with over $500K in Vanguard Energy. There was then an energy slump and it dropped about $250K. In the depth of the slump, my employer changed 401K administrators, and wouldn't you know it, they liquidated all of my vanguard energy because "we don't offer sector funds." Nice timing. Not only did I lose the money, but couldn't ride the next energy bull to get the money back. This event was and is the single most devastating financial event in my lifetime and there isn't a close second.

I really wish you would have shared this story when you first started posting here because it would helped so many of your posts make sense. Now I understand why you are so against 401k plans.

You've pointed out one of the biggest problems with the plans. You have no control over the investment options. You can only choose from what they offer and they can change their offerings at any time. This is just one of the reasons that the standard advice we give is to invest enough in your 401k to get the full company match but then move to funding a Roth. With a Roth, you totally control the investment choices and your choices are practically limitless.

It totally sucks that you got screwed like that by your 401k and had no recourse.

[bjl584]

I lost a significant amount during the 2008 crash.
I don't remember how much it was, but it really doesn't matter.
I made it all back and then some by just staying the course over the years.

[scfr]

LAL - I think I have a different definition of "lost" than you.
Yes, although we've never had our total net worth go down in any year, we've had individual funds go down for the year. But I didn't consider those "losses" because we weren't selling. We were buying and holding. I wouldn't consider something a loss unless I sold it for less than I paid for it.

But if your question is about whether our portfolio is such that we have been able to weather any market dips, the answer to that is yes, so far we have.

[disneysteve]

I wouldn't consider something a loss unless I sold it for less than I paid for it.

Same here, but we have lost money on investments, specifically individual stocks that we sold for less than we paid for them. I don't mess with individual stocks very often but every now and then I get an urge to play a bit. I have a small account that I use for that. I usually get a winner or two and get encouraged and then find a loser and that gets me to stop... until the next time. As long as I stick to doing it with small amounts of money, it really has no bearing on our overall situation. I'll use less than 1% of our portfolio for those trading bouts.

[tripods68]

The only year our Net Worth went down was in 2008 bubble; went down by 2K.

[james.hendrickson]

The only year our Net Worth went down was in 2008 bubble; went down by 2K.

wow - what were you holding?

[TexasHusker]

I really wish you would have shared this story when you first started posting here because it would helped so many of your posts make sense. Now I understand why you are so against 401k plans.

You've pointed out one of the biggest problems with the plans. You have no control over the investment options. You can only choose from what they offer and they can change their offerings at any time. This is just one of the reasons that the standard advice we give is to invest enough in your 401k to get the full company match but then move to funding a Roth. With a Roth, you totally control the investment choices and your choices are practically limitless.

It totally sucks that you got screwed like that by your 401k and had no recourse.

It was so devastating that I considered filing a lawsuit against my company. But how do you file a lawsuit against the same company that is paying you $250K a year, and on what grounds? I had zero chance. Just had to mentally re-group and move on. I left the co a couple years later.

I must admit though, it gave me a very jaded view of these types of plans.

[disneysteve]

I must admit though, it gave me a very jaded view of these types of plans.

I can certainly understand that now.

[tripods68]

wow - what were you holding?

We were heavily in Cash than invested in the market. Our greatest declined were our home value from 435K peak 2006 down to 238K. We paid 283K. Again this was California housing bubble.

[Nutria]

I must admit though, it gave me a very jaded view of these types of plans.

Good thing, then, that I'm invested in very generic (read Vanguard and Schwab) S&P500, Intermediate Bond and Dividend Growth funds...

[TexasHusker]

Good thing, then, that I'm invested in very generic (read Vanguard and Schwab) S&P500, Intermediate Bond and Dividend Growth funds...

I think that conservative investments are good strategy inside a 401K, although I thought Vanguard Energy was pretty vanilla.

[disneysteve]

I think that conservative investments are good strategy inside a 401K, although I thought Vanguard Energy was pretty vanilla.

Well not exactly "vanilla" as a sector fund. And not something every company offers, which is probably why you ran into trouble.

I do have a large investment in a sector fund (Vanguard Health Care) but I hold that in my Roth so I don't have to worry about it going away.

[TexasHusker]

Well not exactly "vanilla" as a sector fund. And not something every company offers, which is probably why you ran into trouble.

I do have a large investment in a sector fund (Vanguard Health Care) but I hold that in my Roth so I don't have to worry about it going away.

Yes as mutual funds go, you could term it a bit more edgy. We went from about 200 investment options down to about 15 - just because the CEO was big golf buddies and personal friends with the "new" administrator. They did their deal, scratched each other's back generously I'm sure, and left me down $250K. ��

[tripods68]

Yes as mutual funds go, you could term it a bit more edgy. We went from about 200 investment options down to about 15 - just because the CEO was big golf buddies and personal friends with the "new" administrator. They did their deal, scratched each other's back generously I'm sure, and left me down $250K. ��

I believe there is a lawsuit pending litigation US Supreme Court whether Employer have the fiduciary responsibility to its employees about their 401K plan. Certainly losing a $250K in 401K qualify a huge lawsuits.