Retirement accounts....losing losing losing?

[silmarg]

selling when it looks bleak is almost always a bad bet.

I always say "dont bet on the end of the world - it will only happen once".

And selling at the bottom is like betting that the end of the world is near.

I have seen my 401k cut in half twice over the 20 years I have been employed. I have stuck it out, and things worked out the first time, and am nearly out of the woods this time.

Its hard not to be emotional about money, but if its retirement money and retirement is a ways off... then dont make rash changes due to market movements.

 

[ICF]

Here's the mistake that most people make. When the market is down, they look at their statements and go "oh no, I've lost so much money" Let's look at two scenarios. Person A sells right away because they don't want to lose any more money and "throw good money after bad". Person A has definitely lost $.

Person B hangs in there and is buying more shares for less money versus before. When the stock market recovers, those paper losses will have turned back positive.

When the market recovers (even slightly), person A says "wow, now's the time to get back in". But when you think about it, person A has done the opposite of most investment gurus. You want to buy low and sell high, but they've sold low and now want to buy when it's high.

Retirement accounts that you contribute to every paycheck have a way of balancing what you are buying (dollar cost averaging). Because you contribute the same amount every time, when the market is high, you are buying less shares. When the market is low, you are buying more shares. This is really the ideal because it's next to impossible to time when prices will be high or low.

If you are years away from needing the money, I would keep sticking with it.

100% exactly right!!

 

[bellarella]

This is a two step process.

1. Figure out if you are invested properly. It sounds like you may actually be riding a bit conservative on the one hand and not diversified enough on the other. A 50% cash allocation is pretty high at your age. You might want to use some of that to rebalance your portfolio. I'm a similar age and have mine set up with roughly 10% in cash, 20% in mid-cap, 20% in international, and 50% in large cap. All of it is pretty much in various index funds, with the exception of the international portion, which we picked a low fee managed fund. We do have cash savings outside of our retirement funds as well.

2. Once you have made sure you are invested properly, leave it alone, other than to rebalance your portfolio periodically. We actually haven't had much to do with ours because this crash brought down everything pretty equally, but sometimes we'll see spikes in one sector related to others and will sell there to buy lower cost shares elsewhere. Or if the off balance isn't about something going up, but something going down, we'll not sell anything, but just reallocate our future contributions to make up in the down cycle area.

When you look at your statements and they are going up, see it as having invested well.

When you look at your statements and they are going down, think of all the sales you are getting on everything you are buying now