401K question?

Question

The other day I transfered my 401K into bonds since it was 2..87 yield and the others were all down from -14.00 to -19.00. Did I do the right thing by monitoring the market and when it goes back then diversify my portfolio. I know I should have at least 60% in large cap 20% in small cap and 20% in international. I am only 28 years old in case if that was a question.

Answer 1

In general, you're supposed to sell when the market is bloated, and buy when the market is cheap (which it may be at this point). By the way, I've never heard of those definitions and separations between large cap , small cap, and international. In fact you should have your money, diversified, among the cheapest bonds; where those bonds come from is something that determines their cheapness, and should not determine their attractiveness as diversifying assets. I recommend you put your money into a mutual fund that tracks one of the stock indexes, I'd say anywhere between 40-70%, and the rest in bonds. Don't worry about diversifying internationally, it's not really a big issue (think about it this way, if the US stock market falls heavily, international markets will experience the same negative shock). As to how much the percentages change, between stocks and bonds, it depends on how long you can let your money sit, and how much income you want/need from the bonds. It also depends on whether you think the market is bloated.

Answer 2

so you waited till the market dropped off to sell and when it come back you're going to buy again? is that correct?

Answer 3

The Plan Administrator of your 401K should be able to give you some insight, although they can not tell you exactly what you should invest in.

Answer 4

Well its your money invest in what you are comfortable with.  The markets are down now with many stocks in 52 week or 50 year (GM) lows.  They may go down further, but I think this is the time to invest in stocks.  Inflation is near 4% or more, so anything less is treading water.  I think the market is the best way to try and beat inflation.

In the last month I have bought pipelines KMP, banks BAC, C, wind energy KDN, and GE.  I have a couple year outlook.