401k Shit the Bed?

[6andcounting]

(03-16-2020, 09:44 AM)michaelsean Wrote: It's not like a casino at all.  The mutual funds you are in make more money if you make money.  If they do poorly, then people stop investing in them and they go away.  

The reason I said don't look at your 401k, is there's not much you can do about it.There are going to be bad times in the market, and every time we hear this is the big one. You have limited options so there's not a lot you can do day to day.  Your new money is buying the mutual fund at a lower rate which will benefit you when the price goes back up.  It's not as good as the price never dropping, but it helps some.

I think this thread can spur some good conversation and be used to trade (pun intend) life changing information and advice so I want to bump it back to the to top.

Good advice.  The only time I do anything with my 401k is increasing contributions when I know I'm getting some bigger paychecks or when the market dips. I don't even have to re-balance as I'm 100% into an S&P500 growth fund. I do different things in my IRA to keep my overall retirement balanced; however, only a small portion of my IRA is in an international mutual fund and a balanced US company fund (including some bonds) at this point. I do have a lot of individual stocks, but I'm also far enough away from retirement that if I retire in 35 years and I'd still be too young to collect social security.


Most fund are passively managed and are designed to mimic an index so wouldn't even worry about a fund itself and it's managers doing poorly. It will come down to the overall economy and the performance of the index. The difference between an index's performance and a passively managed fund based on that index is going to be incredibly small. The difference on bigger funds, such as the S&P 500, will be so small the different per $1,000,000 invested per year won't even amount to a penny. FYI, this is known as Alpha when looking at the risk of a fund. Measured between -1.0 and 1.0 the closer a fund is to 0.0 the more closely it mimics the index. Most funds are expected to have a slightly negative alpha to cover the annual expense ratio.