Should i change my 401K contribution due to the possible recession?
Sunday, March 7th, 2010 at
6:49 pm
johnny asked:
Currently i am contributing to my 401K with very aggressive investments since retirment is still 25+ years away for me.
With all of this talk of a recession, would it be wise to not be so aggressive in my investments for a while?
Currently i am contributing to my 401K with very aggressive investments since retirment is still 25+ years away for me.
With all of this talk of a recession, would it be wise to not be so aggressive in my investments for a while?
Tagged with: 401k Contribution • Investments • Retirment
Filed under: Retirement
Like this post? Subscribe to my RSS feed and get loads more!
if u can afford it dont change ur deduction but change ur allocation of investments to a more moderate risk then aggressive. dont forget the tax benefits to the 401 investment as it is taken pre taxed so dont reduce just reallocate.
If you can make investments now, just keep doing it. A recession now, is very, very unlikely to have much affect 25 years from now.
That is the worst mistake you can make – keep up regular contributions regardless of market ups and downs. If you want to adjust your investment asset allocation, that is another matter.
Not necessarily. No one can time the market. You’ve already lost some money because you missed the top of the market and you’ll probably miss some gains later because you won’t be able to time the bottom either.
If you have a 25 year time horizon, you can actually make money by continuing to buy when prices go down. You’ll be getting more shares of your funds for the same amount of money. (This is called “dollar cost averaging” because it reduces your overall cost of your shares.) When the market recovers, you will have a greater number of shares increasing in value. I bought funds agressively after the stock market crash in 1987 (when many people that it was insane) and I profited handsomely from it.
By trying to time the market, you risk selling when the market is low and buying back in when it’s high. That’s exactly the opposite of how you make money.
It wouldn’t hurt to ease off your ” aggressive” investments..( they are probably your biggest losers day after day)… ease into something ” blended” or ” balanced” for three to six months.
One aggressive area that you wouldn’t get out of would be ” international”…they are only reacting to America’s woes right now…they will get back to business quickly and recover long before most things here do.
Good luck.
P.S. With that 25 year horizon that you mention…you could just let things ride…these downturns are just blips on that kind of a ” chart”….but then again, if you want to be active, why give away money every day? Just a little tweaking would help.