Bob O'Brien
Head Instructor
bobrien@mywealth.com
I remember the 201k joke very well from the last stock market dive back in 2001-02. It’s a term used for when your 401k gets chopped in half, and it goes from a 401k to a “201k” It certainly wasn’t used in the 1929 crash, because 401k’s did not exist. Today they very much do exist and are a huge part of people’s financial future and still a great tool regardless of this painful market. I am not being a dipster here, (a dipster is a term for people that just mindlessly buy any investments just because they are down) I see this market as an opportunity to get smarter about your investing and your finances in general.
Here are a couple of pointers to help you manage your 401k and IRA better:
1. Follow the old rule… the old simple rule to have stocks and bonds in proportion to your age still works and always will! Subtract your age from 110 and that is the percent you should have in stocks and the rest in bonds. If you are 30 years old, subtract 30 – 110% = 80%. So you should have approximately 80% in stocks 20% in bonds. If you are a little more conservative use a 100 and that would be 70% in stocks and 30% bonds. Remember that this is just a benchmark so don’t follow this blindly. There are other things you should consider when allocating your funds. We discuss these variables in the mywealth.com investing course.
2. Rebalance. Rebalance..Rebalance… Imagine watching someone climbing a ladder and they keep trying to climb three and four rungs at a time and then they keep falling flat on their face. That’s exactly what you are doing when you do not rebalance your portfolio. Enroll in the mywealth.com investing course and we can help you figure out the best balance for your 401k plan.
3. Consider using the age based portfolios / or life cycle funds offered in the plan… They accomplish #1 and #2 for you….but if you are disciplined enough to do it yourself, you are usually better off, because you pay for the simplicity in the form of fees and expenses.
4. Realize that if you did all this you would still be down, and it might be a 301k, but you would be much better off with a lot upside for the future. Many economist and experts feel that when we do come out of this recession, the stocks and mutual funds in your 401k we’ll appreciate as the economy improves.
So what does all this mean?
80% to 90% of the investors cannot outperform the market and when it comes to retirement portfolios most people really shouldn’t even try! Stick to the basics and stack the odds in your favor, and only when you feel financially secure, should you set up a side portfolio to experiment, learn and get yourself into the 10% to 20% that can outperform the market.
What should you do now?
I hope my pointers make sense to you and inspire you to learn more. I realize that this information can be a little confusing and even boring for some. This is why we created an online course to teach people financial planning and investing using text and videos. The investing course is only $25 and I’ll be on hand to answer as many questions you have about retirement planning and investing. I invite you to visit our website www.mywealth.com and read more about this course and our other courses where you can enjoy interactive, priceless education from the comfort of your own home.
I look forward to seeing you in the course and assisting you with your situation!
Bob O’Brien
Sr. Instructor
www.mywealth.com
