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So, I have a 401K from my old job that has a bulk of my retirement in it. It has been losing money. But of course no money is going into it so I am not buying anything low.
Should I let it sit around or should I just shove it all into stability of principle?
Since you have left your job, you can take the 401k and roll it over into an IRA with a mutual fund company such as Fidelity or Vanguard. This would give you other options as to how to invest this money. If you're worried about the economy getting worse, you might want to think about a US Treasury bond fund. You won't make much money but you won't lose any either.
Move it into a Fidelity no-fee Rollover IRA and just dump it into Fidelity Cash Reserves. It pays around 5% APY which is good enough because the market right now is terrible and only going to get worse this year. Once we're out of the recession then you can reinvest in some mutual funds.
Move it into a Fidelity no-fee Rollover IRA and just dump it into Fidelity Cash Reserves. It pays around 5% APY which is good enough because the market right now is terrible and only going to get worse this year. Once we're out of the recession then you can reinvest in some mutual funds.
This is market timing and generally leads to lower returns. A better idea would be rollover to Vanguard or Fidelity or other low cost provider. Allocate the funds into a diversified portfolio consisting of equity funds, some bond funds and a cash account. Have the equities pay dividends and some capital gains into bond funds. Have bond funds pay monthly dividends into cash. This approach over time will lead to a nice cash account, backed up by monthly contributions from the bonds which grow every year because the equities are dumping dividends into the bonds.
You probably don't want to leave it in a company account because many 401(k) plans have high fees. And unfortunately, these fees are usually not disclosed.
99% of those with 401ks or other mutual funds have lost a ton of money, generally in the 30 to 40% range and most of those losses occurred subsequent to October 2007. Your funds have lost money because the cost per share has gone down which means if you sell now you are selling low. That is the reverse of common sense. You want to sell high. I for one am leaving my 401k right where it is. It will go up again assuming history repeats itself. I have only lost money on paper, but selling now will "lock in the current level of loss" (M3MItch). I don't want to guarantee my loss by selling now.
<snip>I for one am leaving my 401k right where it is. It will go up again assuming history repeats itself. I have only lost money on paper, but selling now will "lock in the current level of loss" (M3MItch). I don't want to guarantee my loss by selling now.
Most 401(k) plans have higher fees than a low cost provider like Vanguard. So rolling over into a Vanguard (or other low fee provider) IRA makes sense if for no other reason than to reduce fees. As far as selling, you will probably want to rebalnce the funds. Most 401(k)s do not have great choices, so when rolling over, take advantage of the larger selection available.
On this note, in order to have a selection beyond what is offered by a single vendor, you will need to rollover into a discount brokerage firm like Scottrade or eTrade. If you rollover into the Vanguard family, you are limited to only the Vanguard funds. While Vanguard (or Fidelity or ??) is a reputable firm, they do not have the best selection for every asset class. For portfolio diversification, you will need to select from several different firms and this can only be done with via a brokerage account.
Sometimes you just need to bite the bullet and take the loss.
I already had 50% of my 401k in fixed interest but I lost 40% of the other 50% which was split evenly between small cap and large cap.
Yesterday I put everything in cash equivalents. I did this because I believe the risk of the market going down further is much higher than the chance of it going up. Earnings season is upon us and it will not take many bad reports to drop the market another 500 points. On the other hand, I just don't see any potential good news out there which will lift the market 500 or 1000 points anytime soon.
My plan is to revisit my allocations in 3 months and then in 6 months.
I have mine at E-Trade and they will allow you to buy stocks, mutual funds and CDs with it.
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