Hello,

I just started work in a large company and I am intesrested in invest in 401k although I am still young (21).

My compnay matches 75 cents for a dollar I contribute up to 6%, what is the best way for me to contribute in the down market? How do I allocate all the investment in 401K?

Thanks,

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Originally Posted by CFZD

Hello,

I just started work in a large company and I am intesrested in invest in 401k although I am still young (21).

My compnay matches 75 cents for a dollar I contribute up to 6%, what is the best way for me to contribute in the down market? How do I allocate all the investment in 401K?

Thanks,

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CFZD, if I were you, I would invest in preservation funds. They only yield 1-3% typically, but it's better than losing 10%, right?

Also, look at your investment choices and find those funds that have very low maintenance fees: less than 1%. Of those, track a couple over the next couple of months and see if they begin to do better. Everyone is waiting and hoping for the market to turn around but with big banks facing huge write-downs of mortgage and loan losses and oil being highly unstable, the market is a wait-and-see one at this point.

In my opinion, even 401ks are investments that have to be monitored more often than once a year as some people suggest. I know of people who will have to work for 5-6 more years because their 401ks have gotten rocked in the past few months... 1 woman lost nearly 60% of her entire portfolio. For my 401k portfolio choices, nearly every fund is down somewhere of 10-15% which leaves me with little options but to invest in a preservation fund. Sometimes you have to be aggressive and sometimes you have to be conservative, but in a time like this, leaving your funds in an investment that's losing 10% of your entire life savings is not a matter of patience in the market but of protecting your investment.

Your investing for the long haul (in your case the long long haul) get your 401K set up and allocated properly and start socking money away. Forget about whether it's an up or down market because you will be making monthly contributions (dollar cost averaging). Nobody can tell you when the market is going to turn. If you try and time the market you are going to end up with crap for returns. The only monitoring you should do is to re-allocate once or twice a year.

KCDave - seriously, what planet are you from? Mutual funds in 401ks do charge maintenance fees... I'll gladly concede that there are some no load funds but a fund manager is going to get his compensation somehow.

My advice isn't to try and time the market because, as you said, you can't really time the market. However, if I had left my money in the mutual funds I started with, I'd be down a lot more on the year than I am. No one should attempt to day-trade a mutual fund but being a little more proactive with your investments is not a bad thing.

So, in some respects, your advice is just your typical rash of "401k pamphlet talk"... maybe you even work for an investment firm, you brilliant guy, you... :)

When you move your money from stocks to bonds or vice versa based on market conditions, your timing the market. I think every CFP would disagree with this philosophy.

You say your advice isn't to try and time the market, but that's exactly what your trying to do. You pulled your money out hoping the market doesn't fall anymore and then your hoping to get it back in before it goes up too much AND doesn't fall back down.

The whole point in monthly investing is to dollar cost average and this is the best way to invest. If you can't accept the losses during a bear market then you have your asset allocation to aggressive. But, at 21 you can't be too aggressive.