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401K: Ride it Out or Pull the Ripcord?

FthePolice

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#1
Mine Dropped 30% so far. Should I ride it out? Pull Ripcord? Or just stop putting money in?
 

oldgaranddad

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#2
I've been through several dips with my 401K since 1987. Let her ride.
 

Voodoo

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#4
Do the opposite of ur natural instincts. I actually went more long yesterday then I've been in a long time.
 

the_shootist

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#5
The worst thing you can do IMHO is pull out now. Believe me, I tried that and never recovered the losses I incurred. I'm with the other folks here. Let it ride
 

Bottom Feeder

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#10
Twenty Two years???!!
You have mucho time to recover any losses.
Think about us old guys not working any longer. It can be panic time.
It doesn't bother you too much to see it dip and surge if you have saved up four or five hundred thousand buckazoids.

BF
 

the_shootist

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#12
I just checked mine. It looks like mine is down about 10% from before this Dow fire sale thing went down. Currently about 75% is now in bonds. I'm not unhappy with how the account has been managed so far. I'm 66 later this year and contemplating retirement but not sure what I'll do or when I'll do it at this point.
With 22 years left I would stay the course and reap the rewards of the bounce that will inevitably happen once this reset passes. Based on past experience I feel that would be a no brainer decision for you to make IMHO!

"this too shall pass"
 
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FthePolice

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#13
I just checked mine. It looks like mine is down about 10% from before this Dow fire sale thing went down. Currently about 75% is now in bonds. I'm not unhappy with how the account has been managed so far. I'm 66 later this year and contemplating retirement but not sure what I'll do at this point.
With 22 years left I would stay the course and reap the rewards of the bounce that will inevitably happen once this reset passes. Based on past experience I feel that would be a no brainer decision for you to make IMHO!
Like many right now I just hit the panic button when I did my weekly review of finances. I'm 45 and really didn't have much of a 401K until the last 4 years when my income went up and the Trump Economy was at it's peak. Don't have a 2008 or 1987 under my belt when it comes to crashes. Thanks for the advice all. I'll let her ride and keep fighting the good fight.
 

edsl48

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#14
I just checked mine. It looks like mine is down about 10% from before this Dow fire sale thing went down. Currently about 75% is now in bonds. I'm not unhappy with how the account has been managed so far. I'm 66 later this year and contemplating retirement but not sure what I'll do at this point.
With 22 years left I would stay the course and reap the rewards of the bounce that will inevitably happen once this reset passes. Based on past experience I feel that would be a no brainer decision for you to make IMHO!
At 69 I am running with about 40% in bonds and am, like you, insulated from a full dose of the downturn effects. This event shows that being 100% in stocks can be highly risky. One thing I always say when asked about the direction of the market I generally say "I have no idea" because having a good asset allocation between stocks, bonds and metals gives me, based upon history, a good assurance I will be fine.
To sell now if you are at a young age IMHO is to hold on and remember as you age allocating your assets is a long time proven strategy that works.
JMHO
 

the_shootist

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#15
At 69 I am running with about 40% in bonds and am, like you, insulated from a full dose of the downturn effects. This event shows that being 100% in stocks can be highly risky. One thing I always say when asked about the direction of the market I generally say "I have no idea" because having a good asset allocation between stocks, bonds and metals gives me, based upon history, a good assurance I will be fine.
To sell now if you are at a young age IMHO is to hold on and remember as you age allocating your assets is a long time proven strategy that works.
JMHO
I gotta say I'm disappointed at the metals downturn along with the market correction. I didn't expect that but that's why I also have cash as part of my diversified portfolio. Having said that I still think metals is a stretching elastic which will snap back to the up and when it does, watch out!
 

edsl48

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#16
I gotta say I'm disappointed at the metals downturn along with the market correction. I didn't expect that but that's why I also have cash as part of my diversified portfolio. Having said that I still think metals is a stretching elastic which will snap back to the up and when it does, watch out!
I agree with your thoughts on that. My thoughts are, based upon my reading that may be 100% fake news, paper gold is setting the price at the moment because physical gold is drying up. Should this be true sooner or later one will catch up with the other.
Right now the populace is investing in paper, be it dollars or toilet paper...they are both paper. Let the paper gold be eliminated, as in a real crisis, and metals will go to the moon IMHO. It could happen sooner than we think. Who ever heard of negative interest rates and the Government paying us instead of taxing us? We are in un-chartered territory is my thought and at any moment our "government bubble" like all bubbles eventually pop.
 

MrLucky

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#17
My 401k and IRA's are down about 30% also. The funny part is my personal portfolio of stock is only down 10%

Maybe I'm in the wrong business.

To help the "youngsters" out. I'm 68 and not worried about the 30% down.

Famous Wall Street quote "When it's time to buy, you won't want to". Take out the emotion.
 

ttazzman

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#18
I went to cash and metals a couple of years ago.....been waiting for something like this....now best way to ease back in?
 

Voodoo

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#20
Like many right now I just hit the panic button when I did my weekly review of finances. I'm 45 and really didn't have much of a 401K until the last 4 years when my income went up and the Trump Economy was at it's peak. Don't have a 2008 or 1987 under my belt when it comes to crashes. Thanks for the advice all. I'll let her ride and keep fighting the good fight.
Metals are still an excellent insurance policy. As such I pay attention to the general prices but I don't value my "pond" everyday. I add it up about once a year to try and track my progress. It gives you a lot different view then trying to watch them hour by hour. Especially during silly volatility like the past few weeks.
 

nickndfl

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#21
I opened a new 401k with a case of toilet paper. Same thing will happen to it as my old 401k. Stock market is a scam. I made my own with 2 income producing companies.

 

Voodoo

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#22
I opened a new 401k with a case of toilet paper. Same thing will happen to it as my old 401k. Stock market is a scam. I made my own with 2 income producing companies.

Not a scam but it is highly complex. And if you don't understand it very well then maybe it's not a great investment.
 

EO 11110

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#23
suggest allocating a small percentage of contributions to a money market account in your 401k (after this correction is over and you made back some ground)

when next correction happens years down the road, move the accumulated funds from the money market into stocks. you buy at fire-sale prices and more importantly, it helps psychologically (you are attacking......from hunted to hunter)
 

the_shootist

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#24
Not a scam but it is highly complex. And if you don't understand it very well then maybe it's not a great investment.
I understand it enough to limit my exposure to it
 

Voodoo

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#25
I understand it enough to limit my exposure to it
That's a perfectly good strategy. I just happen to like to watch and invest in it as I have watched it for 30 years pretty closely. Really like options trading.
 

the_shootist

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#26
That's a perfectly good strategy. I just happen to like to watch and invest in it as I have watched it for 30 years pretty closely. Really like options trading.
I'm a little envious. It's not my cup of tea and I know enough to not get involved in something I'm not passionate about or interested in
 

edsl48

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#27
One opinion from Hedge Fund Tips
https://www.hedgefundtips.com/the-spanish-flu-coo-coo-ca-choo-stock-market-and-sentiment-results/

The Spanish Flu – Coo coo ca choo – Stock Market (and sentiment results)…
1584661621089.png


According to wikipedia, in 1917, military pathologists reported the onset of a new disease with high mortality that they later recognized as the flu. By late 1917, there had already been a first wave of the epidemic. October 1918 was the deadliest month of the whole pandemic. It is estimated to have killed ~50M people (~3% of the global population at the time).

In the chart above, you will see how the Dow Jones Industrial Average performed over this period. It is unclear whether the epidemic was known as early as 1916 (the market peak), but even if you go off an unrelated peak, the max drawdown for the market was 40%. If you use the 1917 market peak as your starting point, the drawdown was 33%. Note that the deadliest month of the flu was October 1918 when the market had already rallied 35% off the bottom.

Just as the market started discounting the worst case scenario in 1917, it was already discounting a recovery months before the worst case scenario actually occurred in 1918.

Let’s compare that to what we have seen so far:



If you use the flu top from 1917 – when they actually knew about the epidemic, we have now fallen approximately the same amount (discounting the worst) as was seen in 1917 (~33%). The difference is that we have better medicine, methods and experience to mitigate the outcome – relative to what they had available in 1917-1918.

So while the worst was ahead in terms of the Spanish Flu in December of 1917, the worst was done for the stock market after the 33% drop. That does not mean we will repeat the exact trajectory, it’s just something to bear in mind moving forward. The market has already discounted a lot of pain based on its current drop. It will be just as quick to discount a recovery once the initial shock subsides.

As for “Coo coo ca choo” (from the article title), this was simply a phrase used in the Beatles song I Am the Walrus. According to the Urban Dictionary, a widely accepted variation of the meaning of “Coo coo ca choo” is a slang way to assure the state of things is entirely fine; an expression of reassuring goodness. I’m not saying we’re there yet, I’m just saying we will be (follow the guidelines and have faith)…

A Framework to Consider

No one can accurately pick the “bottom’ of the stock market, but here is a framework that might be helpful in how to think about it. There is opportunity for those who are willing to look out a year or so down the road.
If you owned a 100 unit apartment building that paid you rental income for the last ten years – and you knew would continue to pay you rent every year for the next twenty years and beyond – would you be willing to sell it at 50% off today (to another investor) just because it might not pay you any rent for the next 2-5 months?
That is what is happening with some major high quality companies (stocks) at present:
CompanyTickerDown from peak this yearApprox. Dividend Yield at LowWells FargoWFC52%7%United TechnologiesUTX56%3.70%PfizerPFE27%4.70%CiscoCSCO35%3.80%3M Co.MMM29.20%4.30%AbbVieABBV27.40%6.64%JP MorganJPM41.74%4.30%
So while they could all go lower if news gets worse in the short term, you have to ask yourself what do you think their business will look like 12-24 months down the road? If the answer is that they will recover and likely do more business in future years (than last year), there may be opportunity in coming days and weeks to add prudently for the long term (and not worry about short term fluctuations).
If we can see cases peaking in the next 3-6 weeks and the stimulus package is large enough to hold people over ($1-2T), we may be nearing a bottom (in the stock market) right now. No one knows for sure. Right now the market has already discounted a considerable amount of economic contraction.
If the virus goes on beyond what we have seen in China (in time), it is possible we could drop significantly more, but that is a lower probability. There is no way to perfectly handicap this (until you know what the case curve/duration looks like), but regardless of what the general market does in coming weeks, I see opportunity on a company by company basis now and am nibbling each “down” day and sitting tight each green day.
Here is what is needed for a big turnaround:
1. $1T+ Fiscal Stimulus package passed (to start). It will probably be $2T when all is said and done in coming months.
2. An anti-viral/treatment approved for severe cases. There are a few possibilities we have covered in past notes and on Twitter.
3. New cases peak in the US.
4. Ideally, OPEC+ reverses their decision and cuts production. They are not doing themselves any favors right now. This would stabilize credit markets quickly.
5. Vaccine needed ideally by Fall.
Now onto the shorter term view for the General Market:
This week Bank of America put out its monthly Global Fund Manager Survey. If you haven’t read my summary, you can find it below. The most important point (in my view) was looking at the last time managers were this underweight financials/banks (July 2016) and what happened next:

This week’s AAII Sentiment Survey result (Video Explanation) Bullish Percent rose to 34.35% from 29.74% last week. Bearish Percent ticked down to 51.15% from 51.31% last week. Neutrality dropped from 18.95% last week to 14.50% this week. While bearishness is at an elevated level, Bullishness is still a bit high to call complete capitulation. My sense is yesterday’s price movement was not fully reflected in this survey as most participants submit their survey throughout the week.


The CNN “Fear and Greed” Index rose from 4 last week to 5 this week. We are at an extreme in sentiment on this measure. You can learn how this indicator is calculated and how it works here: (Video Explanation)

And finally, this week the NAAIM (National Association of Active Investment Managers Index) (Video Explanation Here) dropped from 29.03% equity exposure last week, to 16.59% this week.

Our message for this week is similar to last week:
We are selectively and slowly adding to those stocks/sectors which are nearing valuation levels that we would define as “pricing in at/near the worst case scenario.”
Most stocks do not yet meet this measure (as the “worst case” is unlikely to materialize), but for those that do we are adding and will continue to do so as opportunity presents itself in coming days and weeks.
But for now, it’s day by day and opportunistic execution…
 

MrLucky

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#29
For those wondering when to dive in. Start picking what you think you'd like to invest in. Research those stocks now. Look at your list & decide what "tickles your fancy". Based on your dd, you'll have a better idea when to put your toe in. It's very difficult to get the absolute bottom.
 

Jarrod32

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#30
Lots of years. Let it ride. Hell, you will have another one if not two of these events before you get through the next 22 years.
Fortunes are made in market crash/bear market conditions.
You want to buy low, right? And sell high?
If you move out of your stock investments now, you are selling low.
Increase your contribution rate, if you can. Buy more stocks while they are on sale.
And recognize that the market may very well go down further before it starts back up again. After 2008, it took three years or so for the market to come all the way back up.
 

Uglytruth

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#32
Scary radio commercial (like we need any more of that) saying they are going to take 30% of pensions, 401K's etc......
Was working & didn't catch the rest but using fear to sell at this point in time is pathetic.
 

stAGgering

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#33
Like many right now I just hit the panic button when I did my weekly review of finances. I'm 45 and really didn't have much of a 401K until the last 4 years when my income went up and the Trump Economy was at it's peak. Don't have a 2008 or 1987 under my belt when it comes to crashes. Thanks for the advice all. I'll let her ride and keep fighting the good fight.

Yeah man, let 'er ride man. CNN Fear Greed Index knows it all man.
Dude you have S e c u r i t y, cuz remember when Obama passed the law just for you....?
Sure you do man.
The US govt can to protect its citizens 401k holdings (Social Security in disguise as US govt blew that) can sell them and buy US BONDS !!
Oh yeah man, US Bonds are the sweetest and safest replacement for your employer matched, fee strangled, law entrapped, penalty buried, diversification retarded, US DOLLAR based, 401k Ponzi.
How could it be nothing but guaranteed.
This is just like last time right?
Down 50% only means up 100% to regain position. Or down 30% means here COMES up 42% no prohbrem, supah good deal just for you.
Why step out of an inflationary destined "recovery" followed by currency implosion hyperinflation, right man.
Oh yeah, like the Weimar Republic dude.
End production and substitute with monetary printing brah !
Weimar's knew they could print more numbers AND sell wheelbarrows for profit.
Wallets are for LOOOOZERS !

Didin't Zimbabwe party on with the mostest ever man with the TRILLION dollar bills?
I'd be so rich if I lived there, a trillionaire man yeah dude reeech !
Those boomers have been the best "Hold "em" investors EVAH !
SO much so, the US went from #1 creditor to #1 debtor in 8 years under their best times favorite president..?
That actor dude with dementia and Fed's Volcker in his ear.
Star Wars dude with like a cowboy hat on Rayman? Ronnie? Jellybean?
Life was Contra, Hamburg Hill, DINKS(double income no kids), Oliver North, CIA drug running... heaven.
Thank God they brought in Greenspan... NOT.

But it will be the same this time, just wait and see man.
The longest historical record fiat currency, USD, will live FOREVAHHH !
The purchasing power of USD can only go.... ? go..... ?
D

O

W

N.
If you go back man, like 22 years and look at the US... It looks exactly the same as right now man !
All good, people working, stocks up, metals up, income gains, CLINTON MAN !!, boomers were in the power stroke of their life span man !!
Your right there now man. Gonna make the big money, invest, buy houses, pay off loans, save a little, work hard and play well.
I'm telling you man, these are the days we'll remember as the greatest !

The Greatest Depression that is.
401k goodbye my friend, was nice never gettin any spending time with you.
Oh, and boomers, your welcome for SS and retirement injection from my generation's most sucked ponzi(aside from USD) 401k BABY !!
No worries man, we all gonna get real poor real soon.
Like Woodstock man.
Yeah man, just no bands man.
Yeah.
And no food either man.
Yeah man.
But it will be cool man.
Yeah man, we can all watch Woodstock on our phones together man !
Yeah man... cool so cool.

Fire up that 401K....car. Convertible Dodge that is.
We are going for a ride to Profit City like "Thelma and Louise".
Top down, to the bottom of stocks ravine !
Fly man yeah we is gonna fly !!
 
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gnome

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#34
I went to cash and metals a couple of years ago.....been waiting for something like this....now best way to ease back in?
Dollar cost average.
Personally, I think we have further to fall.
This isn't 1987, 2001 or 2008.
In none of those cases did the economy grind to a halt except for essentials.
 

Casey Jones

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#35
The worst thing you can do IMHO is pull out now. Believe me, I tried that and never recovered the losses I incurred. I'm with the other folks here. Let it ride
Absolutely. Sell at the bottom of a sudden dip...and the losses (paper) become real.

Given the plans to go to QE-Infinity...you're far more likely to make your money back at least in nominal terms. In terms of what the fiat number will buy...that's another question, but I don't think you'll be any worse than if you sell at this trough.
 

Mr Paradise

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#36
Don’t sell. As long as your employer is matching your contributions just keep doing what you’ve been doing.

The market always bounces back. The fear mongers will say “this time it’s different” but it’s not.
 
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MrLucky

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#37
Even though it's hard to stomach (watching your investments drop), a drop in value isn't a (real) loss until you sell. Even the gain isn't a gain, until you sell.
 

stAGgering

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#38
Even though it's hard to stomach (watching your investments drop), a drop in value isn't a (real) loss until you sell. Even the gain isn't a gain, until you sell.
Yeah man, like a burrito in the 7-11 microwave man.
You know your gonna score, but just how hot man ?!
Dude, is it gonna be like fresh or full of rat crunchies man ?!

Dude man ! You gotta look for the expiration date !
What?
Yeah man, it says like do not eat past like 2020 or maybe ancient 2008 man !
You what dude ?
Man, you gotta look man cuz shit expires man and goes BAD.
No way man I just can't believe it. It is like frozen man. Dude it's safe in the freezer like space food man.
Dude, you are in outer space man.
 

stAGgering

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#39
Don’t sell. As long as your employer is matching your contributions just keep doing what you’ve been doing.

The market always bounces back. The fear mongers will say “this time it’s different” but it’s not.
Yeah man, and the dollar always bounces down man.
Man, you remember when Sugar Cola was .75c man ?
Dude like what?!
Cola man at 7-11 remember for like .75c man. We'd just ask strangers for quarters man and guzzle the day away man. Good times!
Dude! Right man and now we just get nothing from people and use EBT card.
Yeah man I do not even know how much Sugar Cola is man.
Who cares dude, we get it for free.
Yeah man free rocks dude!
 

the_shootist

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#40
Yeah man, and the dollar always bounces down man.
Man, you remember when Sugar Cola was .75c man ?
Dude like what?!
Cola man at 7-11 remember for like .75c man. We'd just ask strangers for quarters man and guzzle the day away man. Good times!
Dude! Right man and now we just get nothing from people and use EBT card.
Yeah man I do not even know how much Sugar Cola is man.
Who cares dude, we get it for free.
Yeah man free rocks dude!
Can I have some of what you're smoking for breakfast? I could use the mental break! :weed: