My 401k has lost a lot of money - how about yours?

Technically, you haven’t lost any money– the numbers on your 401k aren’t money, but a guess at what the paper you hold would be worth if you sold it today. Like most investments, it’s all about what someone will pay for what you have at any given point in time.

That being said, you’re right– we should hold our savings put and wait for the storm to blow over. Investing more? Now there’s something that’s definitely debatable.

@Min
You are right - it is just on paper, but either way, no one really likes to see their 401k values drop like they have… Or at least I would rather see the numbers increasing

Hasty, speculative decisions aren’t advisable in any market. While I am not able to predict the future, I am able to look back carefully at the history of Wall Street … and judging by that history, I expect the market is likely to rebound as it has so often in the past.

The market has certainly seen its share of turbulence through the years, and it often discovers its own remedy. If you were around for Black Monday in 1987, you probably recall the widespread panic that followed. But, you may also recall that in less than two years the market had sprung back, fully regaining the value it had lost by September of 1989.

Do you remember where the Dow was in 1982? It was in the high 700s. By the start of 2000, it had grown more than 1,500% to sit well above 11,000. Yes today we’re around 9,000 but still up considerably over a 26 year period. Any investor should retain long-term faith in the stock market. If you are a short-term investor, stocks are not the place for you.

Fluctuations and corrections happen, but the key is to stay invested through the turbulence. Human nature often leads us to be slightly pessimistic, and when that happens, your instinct may be to go into self-preservation mode. But pray and fully consider your decisions before you act. Will they actually help you to grow or preserve wealth? Or could they someday work against you?

The markets are capable of amazing rebounds, and amazing gains. Look at the 1,000 point swing on Friday. The market is being dominated by fear right now causing people to overreact. Fearful decisions tend to be poor decisions.

I tend to encourage long-term investment strategies in order to help my clients achieve their goals. When I say “long-term” I don’t mean just a few months, I mean several years. So, if the market corrects itself within the next year or so, those who make hasty decisions to sell now may not fare as well as those with patience.

After all, more often than not it tends to be the long-term investor who sees the greatest accumulation of wealth in the long run. History has shown that timing the market is not the recipe for growth. Instead, it is the time you spend in the market.

Great advice Bob! Stay the course.

Second-guessing your financial plan now might not be advisable. And while I wholly support keeping an eye on the market, it’s important to fully understand the news and information before acting on it.

Jay Peroni, CFP
Author of The Faith-Based Millionaire

Thanks Jay,
I feel good when a CFP is in agreement with me!

I’m staying the course seeing Im still young. Dollar cost averaging, hoping that by investing monthly (over time)will smooth the highs and lows out. My timing is very lousy. Im like you Bob, that it does feel like a loss, especially come month end when I compute our net worth for the month.

So what if your 401k has lost you money - it means you are now buying more shares (i.e - your future retirement income) because of cheaper prices.

Remain fully invested. Awhile back a group of researchers from Dimensional Fund Advisors reviewed the performance of the S&P 500 from January 1970 to December 2006. The annualized return for that period was 11.1%.

But here is where things get interesting.

When the researchers removed the 25 best performing days of the market over that 36 year period (less than one day per year), that 11.1% return dropped to 7.6%. A HUGE difference!

So what does one learn from all this?

First, tell your friends and family to quit making short-term changes to their investment strategy based on their emotions. They are foolish if they do. Woe onto anyone that thinks otherwise.

Why do people lose so much in their 401K’s? I moved 100% of mine out of stocks and into garanteed interest on May 6th of this year and haven’t lost any money. In fact I get a nice interest payment on the first of the month. Why do people leave their money exposed to disaster and always says things like I read here. It’s not real money or it’s only paper and your buying shares cheap… Look it isn’t paper it is money. You payed for the funds or stocks with hard earned money in the first place. Any gains you may realize largely just makes up for inflation. If you value the DOW in anything other than dollars the truth is it has been going down for several years prior to this meltdown. I suggest agile investing and not being greedy. A paultry 4% in an interest fund is better than 40% losses. There is the possibility that this is the end of the US markets as we have known them since $8T has vanished. Is it possible the entire thing was nothing more than a pumped up pyamid? What is Google really worth anyway? What is Apple worth? They babble about earnings and growth and market share but hey we have a huge portion of the population about to enter the retirement years and they will start pulling out what is left of their 401K’s and they won’t be buying a new SUV every year. We could be going back to the days when we cooked for ourselves and sewed buttons on shirts and changed our own oil. I’m very skeptical that this will recover anytime soon. Best of luck in your investing and future decisions.

David,
America is founded on capitalism. When we all give up on America and give in to socialism, it will be the end of the America we know and the fall of a great nation. Stocks are designed for the long-run. If you’re not in it for the long-run, you shouldn’t be in stocks. If you are, owning businesses (your own or someone else’s) is one of the surest paths to wealth. Name me one person on the fortune 100 list that became a billionair einvesting in a money market? Taking all your money out of stocks and into cash worked for you THIS time, but less than 1% of the population can accurately time the market. If you faith is in God and not in money, you understand that everything is His (including money) so when the markets take a hit, it’s part of His plan. He will provide for our needs. I still recommend that you create a long-term plan based on facts not trying to time or predict the markets…after all you control what you control (your giving,saving, spending, debt levels, and investment choices) and the stock market is something out of our control. My faithi s in God and things will come back. I believe in God! I believe in America!

Jay Peroni, CFP
Author of The Faith-Based Millionaire

We could be looking at the DOW wilting down to 5000-6000 then we could be looking at 10+ years just to get back to where it was but inflation will offset gains in the markets so there is a real possibility it will never ever get back to where it was in value.

You can move cyclically in and out of stocks and mutual funds if you do your homework. No I don’t believe in daytrading a 401k but the “long haul” has been preached so much to investors they fear making any kind of move and are surprised at a time like this to see their retirement fund down 40%.

I’m a Christian but I don’t believe a lot of the things the wealth and properity folks teach. I don’t believe God plays a role in the general chaos that man creates. I don’t believe he has a hand in the market going up or down nor does he have a hand in what football team makes it to the Super Bowl. If he did he would be violating the free will he designed into mankind.

I do believe God can speak to his children and forwarn them about coming calamities and economic downturns. He can tell us it is time to put it under the mattress so to speak but we have to spend time in prayer and listen to him.

I’ll go back in eventually but I will need to see some positives in the financial sector then some uptics in technology otherwise garanteed interest is fine with me.

Consider buying silver bullion as a hedge against bear markets. I see a lot of people neglect the precious metals market because it’s probably just misunderstood or because not too many people know about it.

here’s some sites that might help you get started…
http://www.silverseek.com
http://www.apmex.com
http://www.kitco.com

The ” Stay the Course ” advice has hurt many people. I lost $150.000 by staying in. This is
not your typical downturn and there is a real chance to lose everything.
I am 59 years old and there is very little chance I will recover even a small fraction of what I lost.
I have ruined my future by “Staying the Course”
and riding out the storm.

@Terry
If I were 59 I think I would agree with you that it might not be worth riding it out. Having probably 30+ years til retirement myself, I don’t really have any other options than to ride it out. My alternative is to pull out the few remaining dollars and throw it under my mattress only to watch in get eaten away by inflation.
Personally I still think we are going to see a nice recovery from this current recession that will offset the loses that people have had, but I have no idea how long it will take.

I also lose a lot of money in my 401k,I agree that as other person with similar situation have no choice but stay in hopefully will recover some lose before retire,but we should learn a lesion why don’t watch our money like david when sense the crise is comeing get out from stock and wait price is right and put back then will make big gain.I blam mysel not to aware enough.

Being down that much, I don’t think you have any choice but to “stay the course.” I might consider rebalancing, depending on your long and short-term goals.

Regardless of the amount one happens to be down, I think staying the course is the best action.

The biggest concern I have are all the similarities to 1929, and the Great Depression that followed. Remember, it took the market almost 15 YEARS to recover.

“Stay the Course,” but “Make Ready for Rough Weather.”

i had about 16k on my 401k from my previous job. when i left the job, i have not put any money on it. it was accumulating the past 5years and now when i check my statement, it’s down to zero balance. what does it really mean? have i lost the whole amount or am i still with the game? is there hope that the money i had in that account will recover? i really don’t know what zero balance means. please help explain. thanks