How did you feel when 15K you contributed into 401K was gone
How did you feel when 15K you contributed into 401K was gone
Well?
I'm sure it happened to some of you in 2007 and when the tech stock crashed a few years ago...
I'm sure it happened to some of you in 2007 and when the tech stock crashed a few years ago...
- Adrian Nenu
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I learned from Diehards years ago to not look at my investment dollar balances. I've found that I enjoy the comfort and confidence in the acqusition of additional shares. ( Of course I'm in the accululation stage and my IPS reflects my risk/return objectives)
Change your perspective!
15K is not lost money until you loose site of your plan objective by panic selling.
Yours,
Warren P.
Change your perspective!
15K is not lost money until you loose site of your plan objective by panic selling.
Yours,
Warren P.
Some have it. Some don't. Either way, here I am!
Me too -- and I was just out of school, barely making ends meet, and furious that this thing everyone told me I "had" to do was losing money quarter after quarter! Fast forward several years. That 401k is the best thing I ever did for myself.Easy Rhino wrote:During the tech implosion, my monthly contributions to my 401k were outpaced by my losses.
Any money I have in the stock market is not money I need in the next 30 years. Many people tell me I'm far too conservative with money for my age (I'm 27 and have 40% of my total assets in cash equivalents, which is actually *down* a bit from what it was), but keeping a high cash balance is the security blanket that allows me to invest the rest comfortably. If the $15.5k I put into my 401k (all stock) evaporates tomorrow, I know it has 30+ years to come back.
If 2007's returns made you uncomfortable, as well as the returns over the last few weeks, you may not have the proper asset allocation or you may be in need of an expanded education in the ways of financial markets.Well?
My short course (free of charge): After diversification and a well thought out asset allocation, do not listen to the noise, nor the financial porn. Enjoy your friends and family. Stay the course.
Part-Owner of Texas |
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“The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
As much as I hate to say this, if "losing" $15K is upsetting, just think what might happen during retirement. Let me explain.
For someone making $60K, a $15K 401k contribution represents one-quarter (25%) of one's annual salary. Now fast-forward to retirement.
Let's say you're now retired with 25X annual expenses. And you have a 50/50 balanced portfolio with half your portfolio in stocks. Let's further assume that you take out 4% each year.
Along comes a bear market and drops your stocks by 20%. That means your overall portfolio has declined by 10%. If your portfolio was your sole support, that represents 2.5 times your annual expenses.
Wrap your arms around that scenario and you'll see that a drop of $15K is just a warm-up to what might lie ahead.
For someone making $60K, a $15K 401k contribution represents one-quarter (25%) of one's annual salary. Now fast-forward to retirement.
Let's say you're now retired with 25X annual expenses. And you have a 50/50 balanced portfolio with half your portfolio in stocks. Let's further assume that you take out 4% each year.
Along comes a bear market and drops your stocks by 20%. That means your overall portfolio has declined by 10%. If your portfolio was your sole support, that represents 2.5 times your annual expenses.
Wrap your arms around that scenario and you'll see that a drop of $15K is just a warm-up to what might lie ahead.
I really think's that why Vanguard goes so conservative with it's "Target Retirement income fund"which is 30% stocks-70% fixed/bonds.most retirement financial experts reccommend between 50% and 60% stocks in retirement,60% being on the high end.bob90245 wrote:As much as I hate to say this, if "losing" $15K is upsetting, just think what might happen during retirement. Let me explain.
For someone making $60K, a $15K 401k contribution represents one-quarter (25%) of one's annual salary. Now fast-forward to retirement.
Let's say you're now retired with 25X annual expenses. And you have a 50/50 balanced portfolio with half your portfolio in stocks. Let's further assume that you take out 4% each year.
Along comes a bear market and drops your stocks by 20%. That means your overall portfolio has declined by 10%. If your portfolio was your sole support, that represents 2.5 times your annual expenses.
Wrap your arms around that scenario and you'll see that a drop of $15K is just a warm-up to what might lie ahead.
I Vanguard realizes how a bad bear market-one that last a few years can really throw off someones retirement portfolio ,in retirement it's more important about not having a very bad year or possibily a few bad years,much more important than trying to squeeze out an 1 percent gain with the added risk of more equities.
As much as I fear this thread will be pulled in a new direction, I will have to make one small comment in reply.plake15 wrote:I really think's that why Vanguard goes so conservative with it's "Target Retirement income fund"which is 30% stocks-70% fixed/bonds.most retirement financial experts reccommend between 50% and 60% stocks in retirement,60% being on the high end.
I Vanguard realizes how a bad bear market-one that last a few years can really throw off someones retirement portfolio ,in retirement it's more important about not having a very bad year or possibily a few bad years,much more important than trying to squeeze out an 1 percent gain with the added risk of more equities.
Suggesting a 30/70 stocks/bond mix in retirement should also include a word about the take-out rate. My example with 50% in stocks assumed an initial 4% and adjusted upward for inflation. (I didn't expicitly write it that way, but most discussions on retirement withdrawals do.) By lowering the stock allocation to 30%, one should probably anticipate a sustainable withdrawal rate somewhat lower than 4%. If you want to look to history as a guide, I will offer this chart:

Source: http://www.fpanet.org/journal/articles/ ... 5388_1.pdf
Well nobody LIKES to see their portfolio value go down. This is a great time to reaccess your risk tolerance. If you are losing sleep or if this really bothers you then IMHO your allocation is too aggressive. Life is too short to lose sleep over investments.
Many of us have made the mistake above, including me, so you are not alone.
Many of us have made the mistake above, including me, so you are not alone.
Best regards, |
Rich
Years of listening to Diehard wisdom has made me appreciate both sides of the coin. When the market goes up, I'm happy to see my balance go up.
When the market goes down, I'm glad to see my 403b contribution, my wife's 401k contribution, and my daughters' 529 contributions buy in at lower prices. These contributions are throughout the month, so almost any time the market dips a bit, we're buying. So there is always a silver lining.

Though I do understand that those in the withdrawal phase don't really have a silver lining.
When the market goes down, I'm glad to see my 403b contribution, my wife's 401k contribution, and my daughters' 529 contributions buy in at lower prices. These contributions are throughout the month, so almost any time the market dips a bit, we're buying. So there is always a silver lining.

Though I do understand that those in the withdrawal phase don't really have a silver lining.
Rodc wrote:Just part of the deal.
Seriously, does not bother me.
Now if it went on for 15 years...
The last protracted bear market (period of falling prices) in US equities started in February 1966 and lasted until August 1982. The Dow Jones index value in February 1966 was 995 and 16 years later it stood at 777. So any investor who stayed fully invested in an average portfolio of shares in this period lost 22%
never say never about that 15 year thing..
What about the dividends? And what if the investor had a diversified equity portfolio that included small cap stocks?plake15 wrote:The last protracted bear market (period of falling prices) in US equities started in February 1966 and lasted until August 1982. The Dow Jones index value in February 1966 was 995 and 16 years later it stood at 777. So any investor who stayed fully invested in an average portfolio of shares in this period lost 22%
small caps had a great run during that time period,yes but even now a days very few people in thier 401Ks,IRAs. diversifed portfolios etc..have more than 10% allocated to small caps....dividends would have helped you sure.Again it would have only helped trim the losses/pain from excurating level pain to really bad pain.If you managed to outproform the market during that time, with dividends,overweighing small caps etc.. and lost only 10% while the market fell 22% your family still starved..not much solice in that.bob90245 wrote:What about the dividends? And what if the investor had a diversified equity portfolio that included small cap stocks?plake15 wrote:The last protracted bear market (period of falling prices) in US equities started in February 1966 and lasted until August 1982. The Dow Jones index value in February 1966 was 995 and 16 years later it stood at 777. So any investor who stayed fully invested in an average portfolio of shares in this period lost 22%
now if you did for some reason heavily overweight small caps during that time 1970's etc.....you better hope you got out of them in 1982,cause from 1983-1990,small caps had one of their worst time periods in history.
Plake,
I don't know where you're getting your data from. But it doesn't match the Ibbotson data I have.
1) Dividends were a substantial component during the timeframe you mentioned. I don't have the DJIA Total Return index which includes reinvested dividends. But I have the S&P 500 total return index which would be an equivalent proxy. This chart shows the growth of $1000 for the S&P 500 from 1966-1982:

2) You are correct that small cap stocks would have helped. According my Ibbotson data, small caps gained 10X during the 1966-1982 period.
3) Again, I don't know where you get your small cap data for the 1983-1990 period. But I don't see them as performning that bad:

Source: http://bobsfiles.home.att.net/download.html#Growth
I don't know where you're getting your data from. But it doesn't match the Ibbotson data I have.
1) Dividends were a substantial component during the timeframe you mentioned. I don't have the DJIA Total Return index which includes reinvested dividends. But I have the S&P 500 total return index which would be an equivalent proxy. This chart shows the growth of $1000 for the S&P 500 from 1966-1982:

2) You are correct that small cap stocks would have helped. According my Ibbotson data, small caps gained 10X during the 1966-1982 period.
3) Again, I don't know where you get your small cap data for the 1983-1990 period. But I don't see them as performning that bad:

Source: http://bobsfiles.home.att.net/download.html#Growth
Re: How did you feel when 15K you contributed into 401K was
I don't think it is a big deal for anyone still contributing. Our 15.5k limit effectively rises when the market goes down.tmm999 wrote:Well?
I'm sure it happened to some of you in 2007 and when the tech stock crashed a few years ago...