What is up with the stock market?

[theantiquetiger]

i just realized I have lost 21% of my 401K in the last twenty one days. The market is down to almost 12,000 points, from almost 14,000 points last summer. I do not know money very well, should I be worried, or is this just the "recession" the news is talking about, and it will recover? I am not going to touch it, I was just wondering.

This is a 401K from my old job and we just got a 401K at my new job (we have a great pension). I was planning on rolling it when the new one is set up here soon.

I am not talking about a lot of money, about $24,000 (it was $30,000 three weeks ago). I am not "out" any money yet, because it is still higher than what I put in, but it is getting close.

Should I be worried?

[Hulk]

The only day you should be worried about your 401K (besides general plan management, such as what allocations you are in) is the day you cash out. The lower the market right now, the more stocks your contributions are buying.

[theantiquetiger]

The only day you should be worried about your 401K (besides general plan management, such as what allocations you are in) is the day you cash out. The lower the market right now, the more stocks your contributions are buying.

Good point!!! I know the experts say to not even open your quarterly statements (which I never do). My old company switched 401K management companies and I got in a new log in and pin number for the new firm, thats the only reason I saw it. I have that entire 401K all in one S&P stock (CMVIX). It is one of three I could choose from(besides a plain old 3% savings), and it was the mid-risk plan.

I was wondering if I should roll it to my new job's 401K as soon as it is set up, roll it when the price goes back up, or just leave it alone for the next 25 years? There is no contributions going into it.

[Hulk]

I'd roll it into the fund now, and you will be converting while the fund is low (meaning more buying power), although you will be cashing out low. The fund you are invested is showing the short term weakness of the market, but has an 18% Annualized return over the past 5 years. It seems to be a good performing balanced fund.

The argument against that is the fund you are rolling out of is probably low as well. You could keep it (as long as there aren't any management fees) and you'd be diversified between the two accounts.

[Adam West]

Someone once asked Warren Buffett what the stock market was going to do the following year...his response "fluctuate".

Nobody knows what is going to happen. If you did, you could make an easy fortune.

I have been investing in the stock market for the past 15 years and typically know more than the most knowledgeable of stock brokers.

I wouldn't worry about what's going on in the stock market right now. Fear and Greed always determine the short term gyrations of the stock market while company performance will always determine the long term performance of a particular stock. I don't even follow the stock market that closely now, even though I have 100% of my retirement tied up in a lot of individual stocks rather than a mutual fund.

I would take the advice given which is to roll your 401(k) from your previous employer to your new one or if you feel comfortable enough, you could always roll it into a self-directed IRA account and manage it yourself.

Make sure you fill out the proper forms and that the check is made out to the 401(K) fund underneath saying FBO (For the Benefit Of) your name. If you have the check made out directly to you, the IRS will tax you on it as a distribution. Most administrators know how this works but just make sure in case they screw up.

You definitely need to diversify. Having 100% of your money tied up in one fund is not good. I don't know your risk tolerance but if I were you, I would look to place the bulk of my money in a fund that buys baskets of S&P 500 stocks like the Vanguard 500 fund. This mutual fund beats almost every actively managed mutual fund. The problem with most mutual funds is they tout big returns but don't tell you what the return is after paying management fees,etc.

When I was tied up in mutual funds, I had about 50% in an S&P 500 tracking fund, about 20% in growth funds, 20% in value funds, and about 10% in funds that trade in foreign stocks. If you want a little less risk, you could add some money to a fund that emphasizes income (purchases bonds, dividend yielding stocks, etc.).

The best thing to do is never panic. I watched my portfolio get crushed when the technology bubble hit and the stock market crashed in the late 90's but rather than panic, I just started buying stocks of great companies that got smashed with everyone else.

I do think we could hit a recession but it remains cloudy at this point. There are some things that need to stablize like oil prices, uncertainties over issues in the Middle East, some continued purging in subprime lending, and the value of the dollar.

The recession can be avoided if some of these items change and it wouldn't hurt if the Fed takes a preemptive strike and lowers short term interest rates which will help as well.

We are probably going to continue to have some crazy fluctuations in the stock market but it's hard to say when it will stabilize at this point.