When to be concerned about 401k loss (bond, IRA, mutual funds)

[KeraKera]

You tell yourself you can weather the ups and downs of investments until the downs present themselves.

I just checked my 401k ( I am in a target fund account and about 80% is in stocks (s and p 500), but I lost a considerable amount of money. I checked to see how the s and p 500 was performing and yes, it's in the dumps for right now.

I think a normal response is to get pissed, but to you savvy investors in here, how do you keep your cool when you see your balance dropping? When should one get concerned and consider changing their asset allocations? My target date to retire is 2050. Maybe I am being too aggressive.

[Aredhel]

Originally Posted by KeraKera

I think a normal response is to get pissed, but to you savvy investors in here, how do you keep your cool when you see your balance dropping?

Simple - I don't closely follow financial news, and I make a point of NOT checking my balance when I know the market is down. It's money I don't plan to use for at least 15 years, so why should I care about the balance right now?

My target date to retire is 2050. Maybe I am being too aggressive.

At your age "too aggressive" is defined by your nerve. If seeing your portfolio (which you don't expect to actually NEED until 2050) fall by 50% or more would cause you to panic sell, then yes, you are being too aggressive. Selling during a severe downturn is the primary way to lose money when investing in balanced funds.

[Merkin]

Target date is 35 years away? 80% stock is not aggressive at all. It might be if you're target date is 2025.

[KeraKera]

Originally Posted by Aredhel

Simple - I don't closely follow financial news, and I make a point of NOT checking my balance when I know the market is down. It's money I don't plan to use for at least 15 years, so why should I care about the balance right now?



At your age "too aggressive" is defined by your nerve. If seeing your portfolio (which you don't expect to actually NEED until 2050) fall by 50% or more would cause you to panic sell, then yes, you are being too aggressive. Selling during a severe downturn is the primary way to lose money when investing in balanced funds.

How is one even able to sell in a company sponsored 401k?

I don't plan in selling, just asking. Oh and I have just increased my contributions a few minutes ago to tell my nerves to suck it up, lol!

[Aredhel]

Originally Posted by KeraKera

How is one even able to sell in a company sponsored 401k?

Most company-sponsored 401k plans offer a variety of investing options: stock mutual funds (both actively managed and indexed), bond funds, combination stock+ bond funds like the target date fund you're currently invested in, money market accounts, and sometimes more exotic things like mortgage funds and REITs. You can't pull your money out of the 401k without paying a heavy tax penalty, but you CAN transfer all the money from one fund offered in the 401k to another offered in the 401k without penalty. So when the market plunges, 401k investors who've exceeded their pucker factor can and do trade out of their stock mutual funds into bond mutual funds or cash accounts, to their long-term financial detriment.

And of course scared people can also simply stop making 401k contributions, which is also detrimental.

I don't plan in selling, just asking. Oh and I have just increased my contributions a few minutes ago to tell my nerves to suck it up, lol!

Good for you! Might as well get more stocks while they are on sale!

[davidt1]

Originally Posted by KeraKera

You tell yourself you can weather the ups and downs of investments until the downs present themselves.

I just checked my 401k ( I am in a target fund account and about 80% is in stocks (s and p 500), but I lost a considerable amount of money. I checked to see how the s and p 500 was performing and yes, it's in the dumps for right now.

I think a normal response is to get pissed, but to you savvy investors in here, how do you keep your cool when you see your balance dropping? When should one get concerned and consider changing their asset allocations? My target date to retire is 2050. Maybe I am being too aggressive.

I cringed a little when I read, "I just checked my 401K". You should check it regularly and respond to market sentiment accordingly. If you had moved your 401k out of stock anytime from May to July, you would have done a lot better than a lot people. This is not hindsight talking and there is no need for a crystal ball. With every moves it makes, the market always tells you what to do.

This chart clearly shows that upward momentum stopped around April. It then fluctuated in a narrow range for months. At this point experienced traders/investors know indistinctly it is time to get out or be very cautious.

[andywire]

It is not a loss until you sell.

The answer depends largely on your age, or more importantly, when you plan to retire.

[turkey-head]

When the market is down, the worst thing you can do is pull your money out.

I know that's obvious... or at least it should be. But I've known too many people to do exactly that.

[lottamoxie]

Don't panic, don't sell, as that will for sure lock in losses. Open a new investment account and contribute to it on your own (it won't be a 401K, but it could be an IRA if you wanted or a Roth IRA or just a regular investment account). Select more conservative funds as part of your new account and channel some cash into the new account. You can slowly invest your way into a less risky overall portfolio.

Then, when your 401K does go back up, as it surely will...eventually.... re-balance your 401K to a more moderate risk (say, 60% stocks instead of 80% stocks) and you should do it when you won't be selling at a loss, or certainly not a substantial loss. That's why it's important to not panic and important not to sell when it dove like it did this past week, which only locks in losses.

[UntilTheNDofTimE]

To me for now I just own "shares" the shares always increase.