2008-10-08

I'm not touching my 401k

There is a lot of talk about cashing out of the market. Taking an entire portfolio and putting it into cash or gold.

I'm leaving mine exactly where it is.

The number one rule of long-term investing (or #8, if you ask CNN Money): Don't time the market.
It would be so nice, wouldn't it, to sell before every market downdraft and then get back in just as the good times roll again. But it's too hard to pull off. Nobody knows when markets will turn. And when they do, they tend to move in quick bursts. By the time you realize an advance has begun, most of it's over. Miss that initial stretch and you'll miss out on most of the gains. The lesson: The surest way to investing success is to buy, then stick to your guns.
A related article makes the point clearly:
The S&P 500 gained 11.8% a year between 1982 and 2001. But only investors who stayed the course managed to earn that big a return.
If invested $10,000 in 1982 in the S&P 500, you'd have over $93k in 2001. If happened to miss the best 10 days in those 10 years, you'd only have $56k.

The horizon for my 401k is well beyond 20 years--more like 40 years. So I'm staying put.

If something happens in the market now that is so bad that a 40-year of 'normal' markets can't erase it, my last concern will be my 401k.

I'll go by a shotgun.

No comments: