Comments on: My 401k has lost a lot of money – how about yours?

By: Larry Weber

Larry Weber — Sat, 18 Jul 2009 15:23:34 +0000

Like Jay, I am a student of stock market history including past manias, panics, depressions and outright deception in the market (25 years experience). My conclusion about the current environment is very different from Jay’s. This crash is different than any other in history because of the extreme leverage and outright deception in the financial system. There is an estimated 500 trillion in derivatives that can explode at any time. Warren Buffet calls these “investments” weapons of financial mass destruction. In addition, private equity firms have what are called covenant lite loans that are similiar to sub prime funding. These type of loans have not exploded yet. If they do, we will have more financial heartache. Moreover, there are thousands of adjustable rate mortgages/interest only mortgages due around 2011 that will be very hard for most home owners to refinance so its likely that more defaults are on the way. Buy and hold is not always the best strategy like Jay mentioned. In “normal times”, you can buy and hold some simple index funds and with proper allocation you’ll probably beat 95 of all “professional” money managers over the long term. However, there are times when an allocation to the cash position is smart and the best investment strategy. We reallocated over 90 percent of our portfolio to cash prior to the crash because of potential issues with sub prime issues, excessive debt in the system and funny accounting practices that the SEC and other oversight organizations don’t have the power to change. The clues to these type of impending financial issues in our system are in state banking regulator reports and other investment oversight documents. A simple allocation to cash prior to 2008 would have saved billions in personal and public pension dollars. Most institutional investors and planners got it wrong and I don’t believe tradtional buy and hold is the answer in certain extraordinary times. Every so often there are events like this one in history that have clear signs of impending danger i.e., excessive debt, over valuation of the market, accounting deception, derivative leverage etc. that makes buy and hold the very worst strategy. The problem is that most investment professionals get complacent and are not trained to see the exceptions on the horizon. Buy and hold is not the Holy Grail that it is made out to be. There are exceptions to this strategy. Ultimately our faith as Christians is in Jesus Christ not the buy and hold philosophy.

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By: GOLDIE

GOLDIE — Tue, 10 Feb 2009 06:53:02 +0000

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

By: just todd

just todd — Mon, 15 Dec 2008 05:29:19 +0000

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.”

By: brother 3

brother 3 — Wed, 26 Nov 2008 04:39:11 +0000

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.

By: bob

bob — Wed, 12 Nov 2008 15:37:30 +0000

@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.

By: Terry Wasson

Terry Wasson — Wed, 12 Nov 2008 14:46:10 +0000

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.

By: Dave

Dave — Wed, 29 Oct 2008 20:15:55 +0000

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

By: david

david — Mon, 27 Oct 2008 23:49:40 +0000

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.

By: Jay Peroni

Jay Peroni — Sat, 25 Oct 2008 04:27:02 +0000

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

By: david

david — Sat, 25 Oct 2008 04:15:42 +0000

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.