I'm under 25, should I keep putting into 401(k)??

Question

I know that in 45 years things SHOULD be higher so I should not care about the current situation, and I don't...

But what I'm asking is should I just put my 401k paycheck contributions into the 'money market fund' option, and wait till the market stops going down... and then place it in the stock funds? OR should I just keep putting in to my mutual fund options as if nothing... I just keep hearing this bear market is to last for a while before it gets better...

So I'm wondering if it makes sense to stash the cash in the money market and just 'redirect' to the stock funds later.

Thanks for any tips.

Answer 1

you have not mentioned rather or not your employer is matching ? if so how much? if it's 50 cents on the dollar which is typical you need to keep contributing the max. just invest in a safe fund for now. you have to consider thats a 50% increase which is hard to beat anywhere, even a decent growing stock.

If they are not matching, then get in a mutual fund or play the dips in the energy or fertilizer sector for now

Answer 2

of course you keep putting money into your stock funds!  would you rather buy low and sell high, or buy high and sell low?

if you wait till the market recovers, then you'll miss out on the actual recovery.  the recovery is where you make a huge chunk of profit or recover losses.  you simply can't do that in a money market account that barely beats inflation.

too many people who try to time the market end up getting out at the bottom, and back in during a bubble.  they will never be able to create wealth because they are confident that they know the market better than their money managers, who make a darn good living knowing the ins and outs of the market.

Answer 3

Keep putting it into the stock funds.  At your age, your investing should be aggressive.  Don't try to time market swings.

Answer 4

Since you're young you should be adding all you can to retirement funds.  In a diversified portfolio the best time to be adding money is when prices are down.  Your contributions buy more.  Never try to time the market with retirement money.  Money market funds and other fixed income funds like bonds should be used to hedge risk.  The rule of thumb is that you should have the same percentage in fixed income as your age, and the rest in equities.

Answer 5

Only a fool tries to time the market.   Now is the absolute best time to be buying those mutual funds.  Think about it.  If you try to time the market you will lose.  So what if it does drop another 1000 points although I don't think it will.  That would be all the better for you.

Answer 6

That is what I did. All my contributions went in to MM, then I moved it.

I also used it, still do, to time the market a little. With a click of the mouse I can move 100's of thousands in and out of the market with NO tax liability or reporting since it is in a tax deferred account.

Answer 7

You can stash your contributions in money market. While it's a low interest option, it's a sure thing. Money market $ can easily be pumped into better mutual funds once the market takes a turn for the better...just keep an eye out for bluer skies. The other option is to put them in a high interest GIC ...then dump the proceeds in your 401

Answer 8

I believe in preserving capital first and looking for return on capital next.  Your thought process is reasonable and it's a sound strategy.  Others do it, why shouldn't you?

Timing is a matter of perspective.  You could be inadvertently timing the market by dollar averaging down.  For example, suppose you get a raise during a bear market.  Your salary goes up, so does your contribution.  You are unconciously betting the market will improve in the short term which may or may not happen.  Right now, your research is telling you to go the other direction because you believe the market is in for some rough times.  In the end, no one can tell you with absolute certainty what will happen in the next 12 months so relying on your own research and judgement is the best strategy.

Answer 9

You are really asking a question about market timing.  Put another way, you are suggesting that you can decide when to get into stocks and when to get out better and faster than the experts, who do this all day every day.  

Real world results suggest that you will not be consistently better at timing the market than everyone else.  You are further handicapped by being in mutual funds, which only trade once per day.  

Dollar cost averaging plus buy and hold should be the primary strategies for you and for most people.  You can re-balance your account occasionally to restore your target asset allocation.  These strategies will make you more in the long run, so focus on that, not on a short-term loss or gain in the market.

Be happy that you are buying more shares for a lower price, reducing your average cost, and that you still have many years left for your investments  to appreciate.  If you are not comfortable with what the stock market is doing, stop looking at the market so often or adjust your asset allocation to something you can stick with long-term.