401K to 201K – Next Stop 101K ?

Our hope of a better stock market in 2009 is off to a rocky start.  January goes down in the record books as the worst January EVER.  If the old adage “so goes January – so goes the year holds true” why are we playing this game?  If you aren’t asking yourself that question – maybe you should.

In the February 25, 2008 Time & Money Report, I said the following:

For the ones of you that are stuck in 401K plans, I still think that cash is the best place for now. The S&P 500 is down 7.9% for the year. Last time I checked 0% is better than negative 7.9%. If you have an option of moving your money into a self-directed IRA; I would do it in a nanosecond. Most 401K plans are so limited that it is hard to take advantage of the part of the market that is working now (Natural Resource Stocks). If the S&P 500 can break 1400 – then standard 401K options can be considered again.

After only 30 days, the S&P 500 is already down 8.6%.  Does that sound like déjà vu?  If you are down 30, 40 or 50% in the past year – trying to convince you to sell now is futile.  However, at a bare minimum all new 401K contributions should be directed into the money market portion of your account.  Personally, I would halt all 401K contributions above your company match and redirect those dollars into an account where I had full access to various non-traditional funds – like precious metals and inverse funds.

The definition of insanity is doing the same thing over and over again expecting a different result.  An alternate definition is refusing to look at your statements and expecting things to magically improve in the future.

Why continue playing the stock market game?  If you have any desire to retire – saving and investing are essential.  However, if you don’t fix what is broke (following the same old investing philosophy “buy and hold”) – you will be broke when you can least afford it – in retirement.


The Real Money portfolio is off to a great start +7.8% vs. S&P 500 -8.6%.  Learn how we buck the odds.

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