My 401K is down -15.98% as of 07/11/08. Time to panic?

Question

I'm 23 and have a 401K with my employer where I put in 16% of my paycheck since I can afford it now. I'm down -15.98% for the year. Should I panic? Should I put less money into it since im at a loss? Should I ride it out? I understand that in the long term 401K plans generally gain 10%, but I need something to put my mind at ease.

Answer 1

Ride it out. You are young and will have time to rebuild your

portfolio. The people who should worry are people who are

in their 60s and above as they don't have much time to make up any of their losses. The stock market will always have

dips and rises and stats prove over and over again that if you

ride them out you lose less and gain more than panicking

and selling short. We are all in the same boat. Don't make the same mistake I did when I was 28 and yank it out to pay for a trip. I pulled 10,000. out of my pension fund for a trip to Europe. Now I am sitting at 60 unable to retire until I am 65. If I had left the money in I would have been able to retire at

55 with a full pension. I know it seems a long way off for you but it comes quicker than you think and you will be glad you did!!

Answer 2

Stay the course.

Everyone's 401k is down this year.

Panicing and stopping contributions is the worse thing that you can do.

Answer 3

A lot of people are taking a hit right now. Cashing out would be a big mistake. There is much to be said for just letting it ride as the market will rebound eventually. You are only 23 so you yourself can rebound later.

Look at your paperwork or ask for it. Generally there is a pie chart that will show the slice of funds that you have that are conservative... say a 10% record of return. Then the medium ones and then the high ones..... say 18%. You are young so you can do a bigger slice of the high ones. People who are older go to more of a conservative slice and are stepping away from them.

I have a degree in finance but it is not what I do for a living. My wife before we got married just randomly picked whatever funds. Turns out that she picked funds that do a lot of international business so they are somewhat immune to the US economy. I am doing OK with mine but it boggles my mind when I look at her statements.

16% is a bit much right now. Personally I would back down to 8% or whatever and put some in CDs, a Roth IRA or whatnot so you are diversified and can access the money should you need it.

Answer 4

Unless you are planning to retire tomorrow (which is obviously unlikely)...don't panic!  I have a 403B (like a 401K) and yes it has been down recently, but, look at it this way..there is a "sale" on stocks which your mutual fund is taking advantage of, in a way, for the future.  Let's see...you will probably retire in the next 40 years.  Take a look back at the Stock Market over the past 40 years.  I think it has gone up some.  

John

http://spotlighttees.com

Answer 5

Think big picture.  You're only 23 and won't touch the money until 30-40 years from now.  You're going to be just fine.  The worse thing you can do is to make any drastic changes.  Look at it this way, your contributions are now buy more shares than they did before so when the market recovers (not if!), you're going to that much better off.

Answer 6

The WORST thing you can do now is panic and sell it at a loss.  You've got decades to go before retirement.  Keep making regular contributions.  The markets alway come back.

Your "loss" is typical right now, but its only on paper.  Don't make it real.

Answer 7

Don't panic, there's no need for that.  You will win in the long run, just keep contributing.  If you have the option to review the funds you're invested in, you could talk to your broker/administrator about that and possibly find some that are performing better or better suited to the state of the economy.