vader1

Ok, so with the market bouncing up and down I think I am down about $25-$30k for the year so far. I am hoping to recover some of this before year end. I basically have a tiny ROTH, and most of my money in employer defined contribution plan and about half as much in my deffered comp plan. They have been treading water for months with the market.

I can't do anything about my employer plan, the contribution is automatic and required by the employer but comes with a healthy match and no fees. The deffered comp has about ten fund choices, again no fees.

My problem comes in that I see trouble on the horizon. I can see the market fallin ANOTHER 1000 points easy given the right conditions and more bank failures. I don't think the banks are out of the woods yet. The ripple effects on the economy have not been felt yet either IMHO.

I could go bonds with some existing money and future contributions, have been putting more in foriegn funds that domestic markets but they have not been much better.

I am also risk averse. I have toyed with the idea of stopping my deffered comp contributions (which will then be taxed and I lose about a third to the gov) and putting it into advance mortgage payments.

I know this does not make huge financial sense, my rate is 5.5% which after taxes is less than 4% but I am in the first few years of the mortgage. I would love to refi when I can beat that on a 15 year, which may never happen or could happen in the next couple years. I do NOT want to pay an extra $400-$500 a month on a 15 yr which means I would need to knock off a little extra principal. So I thought I could put the deffered comp money (after taxes) into my mortgage, pay it down for a year or two until I feel the market has stabilized and is headed upward or at least is not in danger of plunging further and then get back into the market. If rates are good, then I can knock about ten years off my mortgage with very little increase in payment. I don't plan to move so if the home price declines a bit short term I don't care.

But this only makes sense if I truly believe that the market will go down further AND I will get a decent rate on a 15 yr within the next three years or so.

Just looking for a risk averse place to put money that will pay off in the long run and shaving ten years off my mortgage would be fantastic. But I know HISTORICALLY the market is the best place. Just not sure the history of the market has dealt with real competition from emerging financial powers, surging energy prices, bank meltdowns, credit crunch, falling dollar, and consumers with no money to spend all at the same time before.

What are you guys considering to weather the storm?

topdown04

Now is the time to invest more in stocks, not less. The idea is to buy them when they are cheaper. Don't stop contributing to your retirement plan when prices are dropping!

vader1

I don't know that I agree totally. If you think the market will drop farther then you would wait for it to drop before you buy. Thats my point, I don't think we have hit bottom.

If the market goes down another 10% over the next year and I put my contributions in a fixed interest account earning 2% in a year I can get 12% more stock for my money than I would get putting it in now. Buying at the bottom is better than buying on the way down.

I get buying low and selling high I just see lots of negative signs for the economy and few positive ones. Unemployment is also going up fast.

My brain says, "its going down farther."

Penforhire

You don't have a "fixed fund" option? My 401K is still offering that somewhere over 4% for the conservative among us. Otherwise not a bad idea in terms of accomplishing the same thing.

Normally one downside is you WANT leverage on an appreciating asset but in the near past and future our homes are not appreciating! Another downside is liquidity. You may not be able to pull that money out quickly if you need it. You may say, just exercise HELOC. My bank continues to lower my limit so that option can disappear in a hurry.

I'm not going to comment on whether it is good or bad to be conservative because it is bad to be me right now...

sahtt

Don't try to call a bottom. We are at 113, down from 140. It would have to get to down 8k for your plan to be good risk vs reward. It's long term, make it long term. Pick up some energy if you have to buy something.

topdown04

I suppose if you "know" that the market will go significantly lower, pull out now and get in cheaper later. There is a real danger of missing a big bounce if you wait just a little bit too long. There was a funny fictitious stock chart in the Official thread that showed this effect.

All I know is that my new contributions are buying more shares than they were last year, and that's good enough for me to keep putting long term (retirement) money in. Best of luck.

vader1

[QUOTE=Penforhire,Sep 10 2008, 12:10 PM] You don't have a "fixed fund" option?

chrisjgiuliano

Vader,

Even though you might lose money on paper, you will accumulate more shares if you buy now. If you wait until later to buy, there is a good chance you will miss the bounce and have to buy back on the way up. It really depends on your time horizon, but if you have 5-10 years, buy buy buy buy more shares now and wait for the inevitable bounce back up. I am picking up wayyyyyy more shares in my Roth401K (With 100% match up to 6%) than I could ever hope to with a healthy market :-D

Best of Luck either way!

PearlwhiteS2k

First of all how old are you? If you got 10 years or more before retirement. I would strongly advise you to keep on buying. You can never actually catch the bottom of the market. Buying not near the bottom instead of buying near the high will get you more shares for the $$$ when the market does recover.

lOOkatme

I agree with what others have said.


Figure out what accounts to dump money into to reduce your taxes....and future taxes based off your future effective tax rate which no one knows?


but keep accumulating shares in sectors that will perform well in the future...and are underpriced.


I like energy right here to start accumulating till we start going back up (might be a month or two so slowly keep accumulating shares...I am).


I also like agriculture......metals, etc for the commodity supercycle.


I think some good dividend paying stocks are worth a look.

I would stay away from financials, housing, retail.....almost all countries. stick to energy, food, health, needs.