Is your 401K down too?

Oldman answered one year ago …

Yes. My 403(b) and IRA accounts are down...maybe not as much as the general market, but they're for a long term purpose.

At this time I add to positions that "should" be worth more, from a cash account where I've placed the outperformances in 2005-2007. I try to keep the ratio of foreign to domestic at 60:40; small to large at 70:30. I've followed this "strategy" for 30 years...and it averages 9%+/ann. You put the divs and cgs in a cash account and use it to bring the balances up when the NAV's are dowm..

The business of autoreinvesting dividends and cgs occurs when the NAVs are increasing in value, which = a stupid 'buy high', and is not an effective dollar cost averaging process. It's a much more beneficial process to dollar-value-average, and rebalance and put accumulated cash to work when NAV's are down. I know that the automatic reinvesting of the e.g., yr-end dividends is part of every institutional sheltered acct(401k, 403b, 457, etc) but it's insane! Once a quarter, check to see what's paid a dividend or cg and move that equivalent "purchase" to a cash subaccount...then during a market downturn for the sector, or the whole market, you can BUY LOW!

You just need to have some discipline to :

a:don't panic...those companies and countries won't disappear

b: wait until the NAVs are low enough in a sector or market or country, to be able to buy at a very cheap price. After all the 401k is not for immediate use.

There are also sites which can help if you want to trend-trade...i.e., move money from low performing to high-performing sectors or funds...but it depends on the plan of your 401K, some don't permit rapid or frequent changes.

About 20 years before I retired, I had all deferred deposits put into a cash account. About once a quarter, or once a year, I "bought" a position. When China & SE Asia were beaten by the Asian crisis, I put money in. When Gold was at <200, I put money in...Last year in November, I took money from the China, SE Asia and Latin America sectors, and put it to cash. I just milk the 2% yield from the gold mutual fund to cash...and if gold drops to <200, maybe I'll buy more, but not at 900.00

I've recently (in the past 3 years) only bought small positions in foereign dividend-paying securities...NO new U.S. securities in my IRA's. No > 2% of the portfolio is in any one security; no more than 10% of a portfolio is in any sector or counrtry.