Getting Personal
Market Turmoil
Question: I have some money in 401K but it's all vanishing because of the stock market drop. Is it a good idea to ride it out,or transfer the money out of stocks (investment optons) and put it in a safe stable fund? Frank, Satellite Beach, FL
Answer: A bear is mauling the stock market, and the worst may be yet to come. The S&P 500 is down some 17% from its October high, still in so-called correction territory but not all that distant from the 20% decline that traditionally defines a bear market. The desire to get away from the carnage is understandable. (My answer to your question assumes that you're still in the "accumulation" stage of life, working and adding to your retirement portfolio.)
Still, for many investors the first rule of managing money in a downturn seems to be "do no harm." When people try to time the market, the result is usually disastrous. The average saver who sits tight with their retirement money during a bear market typically does much better than the person that gets in and out of the market.
That said, my mantra is to take advantage of this time by figuring out whether you're comfortable with your portfolio. Are you too much in stocks? Bonds? International? How do you wish your portfolio was constructed? Once you've figured that out, then I would create that portfolio over time.
03/14/08 by Chris FarrellLooking for guidance on your personal finances? I'm taking your questions and answering one here each day. Just click on the "Ask a question" link to tell me what's on your mind.
Chris Farrell Marketplace Money personal finance guru
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Comments (1)
Dear Chris,
Thanks for your insights.
I've now interviewed a number of financial planners, and have found one w/whom to 'vest w/the design and maintenance of my retirement funds. Having no 'gift for retraining my brain around markets, investing,cost-expenses, etc., and wanting my "pot o' money" to last and pay me an income on a regular retired basis then I've a question.
Is paying a 1% mgt fee plus the various fund vesting expenses (a whole field of semi hidden #'s) a smart move?
Note: I tried doing my own investing first in Dreyfus funds while just out of college then Vanguard Index ones, and finally giving in to my ignorance dumped all into a fine old-style annuity. Now realize it's too many hidden expenses and costs that don't "keep pace" w/inflation much less todays' economy. Hence the extraction cost of !% seems mild compared to staying there.
Rebuilding a portfolio to last my projected 15-20years is my goal w/only about $495K. [I'm a gay man, so no dependents nor 'spouse, & home is paid for.] I already live simply as I expect on about $17K/annum. And my mind just shudders from attempting the job of investing on my own. Just too many complexities & no personal interest. Finally, my mental faculties seem just too dim to take on the tasks.
My apologies for long querry. Perhaps you've already addressed this.
Cordially,
Graham Dunlap