question about 401K

[sheenie2000]

Here's a chart of Japan's Nikkei Stock Index below.
Japan peaked out at 40,000 in 1990 when they had their bubble. It crashed and continued to crash never to return to its peak. Almost 20 years later, it's nowhere close to 40,000. Don't you think this can't happen here?


^N225: Basic Chart for NIKKEI 225 - Yahoo! Finance=

And look at what Obama said in his interview:

"One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what's called "The Lost Decade." They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn't see any growth whatsoever."

Sound familiar?

Calculated Risk: Obama on Nationalization

[LongArm]

Originally Posted by samnyc

I am just going to bite the bullet and move all my money to money market so I will stop losing money for a while. I know I lost lot of money and I don't think it will ever come back...

Well, it won't in a money market (not for a long, long time anyway). You WILL very likely get your money back (at some point) in stock funds, unless you're ignorant enough to think the stock market is never going to recover. If you're relatively young, moving completely out of stocks and into a money market NOW--AFTER the market has already dropped 40%--would be a foolish mistake, IMO, because you'll effectively be locking in your losses.

BTW, I generally agree with Davidt1's position that a loss is a loss whether you sell or not--in fact, I've preached the same thing many times myself. But we're not talking about trading individual stocks in a taxable account here. We're talking about investing in stock funds within a tax-deferred 401k. Different circumstances, different rules.

[Jaggy001]

There is an argument for taking 401k money out of the market at least until the earnings season is over. I think there will be a lot of volatility over the next few months which is good for day traders, covered calls etc. but does not do much for longer term investments like the 401k. I just don't see the Dow hitting 8500 or 9000 points in the next 6 months. On the other hand, I do think there is a possibility that it could drop another 500 - 1000 points if corporate profits get hit badly. I have pulled my 401k into cash equivalents and intend to revisit in 3 months and again in 6 months. That will not stop me trying to play the volatility through covered calls. Both are part of a diversified strategy.

[Ultrarunner]

Originally Posted by sheenie2000

1) Contribute only up to the company match.
2) Move your money to a MMF within your 401K.
3) Move your money on a rally. Wait for the market to go up a few hundred points and then SELL your stocks and put it into a MMF.

Won't work with my Employer sponsored 401k plan due to a limit instituted restricting round-trip movement of funds within the account.

Like your idea

[dsnellen]

Originally Posted by Jaggy001

<snip> On the other hand, I do think there is a possibility that it could drop another 500 - 1000 points if corporate profits get hit badly. I have pulled my 401k into cash equivalents and intend to revisit in 3 months and again in 6 months. That will not stop me trying to play the volatility through covered calls. Both are part of a diversified strategy.

If you truly think the market will drop another 500 - 1000, then you may as well make some money. Buy SJF which shorts the Russell 1000 value stocks. Its up 45% over the past year. If the market drops another 500, the return may jump to 80%+. Or go for SKF, its up 117% for the year ending yesterday. That will probaly double in a 1,000 point market drop. A lot of folks 'absolutely know' or had a brother-in-law tell them the market will continue to fall; and they are so free with that advice. If you truly believe the market will fall over the next six months, then short it and keep us informed as to how that is working. If the shorting strategy seems a little too riskly then maybe you are not as firm in your convictions.

Jaggy001: Can you explan how selling (or buying?) covered calls are a part of a diversified strategy?

[Jaggy001]

Originally Posted by dsnellen

Jaggy001: Can you explan how selling (or buying?) covered calls are a part of a diversified strategy?

Absolutely ... my investments cover 401k, real estate, cash including CDs, long term private (non-traded) stocks as well as trying to take advantage of short term volatility through covered calls.

So the strategy is to protect the bulk of my capital while trying to take advantage of short term volatility. I like covered calls in this market because the volatility has driven premiums up which is protecting the downside.

[resettheclock]

I am not a specialist, but I do somehow believe that now is the time to actually buy more shares. I mean face it - it will be a long recovery, but it has already started. MAybe the share prices won't reach their levels of previous years, but they'll rise...And if everybody thought like me... I would be right wouldn't I ?