Thursday, October 2, 2008

Why not to Sweat your 401k (<45 age group)

If you're under 45, then your 401k is probably mostly growth-oriented (somewhat aggressive). Many republicans are trying to sell their changes to the bailout by scaring "average folks" ….less over their 401k's. If you're in just about any age group, fiddling with your investments now is probably a knee-jerk reaction that won't do anyone much good. First of all, most of the current volatility is fueled by panic and a general sense of uncertainty, so after the 777 drop one day, it's not uncommon to see a 550 jump the next (like we did this week). But think about it: Do you really know more than the people who do this 24/7? If you did, you'd have already jumped out of your risky investments. Right now, you have to consider yesterday's loss as sunk, as hard as that is, not panic, and think about your expectations for the next month, year, decade, etc.

For the younger bunch, the value in your retirement is still climbing a lot on the back of your (and your employer's) contributions to it. That means that your contributions are getting stocks relatively cheaper, and that can work to your advantage, looking over the window over which you'll be continuing to participate in the labor force. It's the simplest rule in economics: BUY LOW SELL HIGH.

No comments:

Post a Comment