Watching the unfolding financial train wreck overseas and the constant rate hike talk here in the U.S. we moved out of the market a little more in the last couple weeks.
Nothing wrong with sitting on the sidelines for a while.
I mentioned this at a conference I just spoke at and got about a half dozen questions about this.
It's nothing new or monumental, just requires you to put yourself back in the driver's seat a little bit.
I assume many people's 401K's are similar in setup to the 529 plan (college savings) we have had for about 14 years now. You may have only a few "options" in that sort of plan. They kind of suck in that regard really....
For example, our 529 college saving plan gives us just FOUR options-
An aggressive approach
A Managed allocation based on age
A balanced fund
A "guaranteed" fund
Ranked more or less from most speculative to less speculative.
Yes I put "guaranteed" in quotes- "see the quotation marks I'm making with my claw hands?" Cause of course we know nothing is "guaranteed" most especially when it comes to this sort of thing.
So for most of the last 13 or so years we have principally used the managed allocation based on age fund and the balanced fund. These have given good albeit not spectacular returns.
As he is in high school now, we have been moving more and more of the funds into the "guaranteed" option to reduce market risk. Yes I know money market funds are still risky, not guaranteed, etc. But in those 4 lousy options, that's the safest. The return on the "guaranteed" has run 3% down to 1.5% currently I believe. Obviously it's not in there for the return....
Now the really sucky part....
Under this 529 plan, you are only allowed two "moves" per YEAR. So let's say you want to protect some of your funds that were in the aggressive fund and you move half of it into guaranteed, then the market drops a little bit. You then have only ONE "move" left in that calendar year.
So you can't be too wishy washy about it, you have to plan for these moves and where possible, make them at opportune times.
Just like a mutual fund, you won't know the NAV till close of the trading day. So is it up for is it down when you go to sell it? Best you can do is sell on an up market day. Watch the market, call them or get online about 3:45 and make the transaction. After that, you'll be looking at the trade going through the next trading day.
It's not like a stock wherein the price will fluctuate around during the day and you can often time that sale to make a little extra money.
If you have a 401K, I assume from talking to so many people with similar 4-6 fund options within the 401K, that your options will be similar. Find the safest harbor for your money and be prepared to sit on the sidelines for six months, maybe a year.
It takes some guts to buy back in when the market is low, but it's worked out for me several times.
If your retirement is close and thereby you might need the money soon, just leave it in a safe option. If you have a 10, 20 year horizon, then watch for a big correction and look for bargains to get back into the market after a while. Someone said "the best time to buy is when their is blood in the streets."
Since this is part of your if TS DOESN'T HTF planning, making the most of it via the market timing will help. You don't have to try to wait for or hit the exact market bottom, no one ever does, but just try to scoop up bargains after a correction.
And it's o.k. to be on the sidelines for a while. It's YOUR money, I would be protecting it now.
Nothing wrong with sitting on the sidelines for a while.
I mentioned this at a conference I just spoke at and got about a half dozen questions about this.
It's nothing new or monumental, just requires you to put yourself back in the driver's seat a little bit.
I assume many people's 401K's are similar in setup to the 529 plan (college savings) we have had for about 14 years now. You may have only a few "options" in that sort of plan. They kind of suck in that regard really....
For example, our 529 college saving plan gives us just FOUR options-
An aggressive approach
A Managed allocation based on age
A balanced fund
A "guaranteed" fund
Ranked more or less from most speculative to less speculative.
Yes I put "guaranteed" in quotes- "see the quotation marks I'm making with my claw hands?" Cause of course we know nothing is "guaranteed" most especially when it comes to this sort of thing.
So for most of the last 13 or so years we have principally used the managed allocation based on age fund and the balanced fund. These have given good albeit not spectacular returns.
As he is in high school now, we have been moving more and more of the funds into the "guaranteed" option to reduce market risk. Yes I know money market funds are still risky, not guaranteed, etc. But in those 4 lousy options, that's the safest. The return on the "guaranteed" has run 3% down to 1.5% currently I believe. Obviously it's not in there for the return....
Now the really sucky part....
Under this 529 plan, you are only allowed two "moves" per YEAR. So let's say you want to protect some of your funds that were in the aggressive fund and you move half of it into guaranteed, then the market drops a little bit. You then have only ONE "move" left in that calendar year.
So you can't be too wishy washy about it, you have to plan for these moves and where possible, make them at opportune times.
Just like a mutual fund, you won't know the NAV till close of the trading day. So is it up for is it down when you go to sell it? Best you can do is sell on an up market day. Watch the market, call them or get online about 3:45 and make the transaction. After that, you'll be looking at the trade going through the next trading day.
It's not like a stock wherein the price will fluctuate around during the day and you can often time that sale to make a little extra money.
If you have a 401K, I assume from talking to so many people with similar 4-6 fund options within the 401K, that your options will be similar. Find the safest harbor for your money and be prepared to sit on the sidelines for six months, maybe a year.
It takes some guts to buy back in when the market is low, but it's worked out for me several times.
If your retirement is close and thereby you might need the money soon, just leave it in a safe option. If you have a 10, 20 year horizon, then watch for a big correction and look for bargains to get back into the market after a while. Someone said "the best time to buy is when their is blood in the streets."
Since this is part of your if TS DOESN'T HTF planning, making the most of it via the market timing will help. You don't have to try to wait for or hit the exact market bottom, no one ever does, but just try to scoop up bargains after a correction.
And it's o.k. to be on the sidelines for a while. It's YOUR money, I would be protecting it now.
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