Proof that a 401(k) is a LONG-TERM investment
Comments(12) Yesterday, I wrote that an important rule of investing is that those who get hurt the worst are those who pull out of long-term investments at the bottom. Think of it like jumping off a fast moving roller coaster right before it climbs its steepest hill: not only will you get hurt, but you’ll miss the best part of the ride.Then, there was a HUGE rally on Wall Street and the Dow Jones closed up more than 900 points — the biggest percentage gain in 75 years, according to the New York Times.
This proves my point. If you jumped off the roller coaster last week and got out of your 401(k) last week, you essentially took four hit: 1) You paid an early withdrawal fee if you’re a young investor; 2) you paid a big tax penalty; 3) you lost principle by pulling out while the market was down and 4) worst of all, you missed the biggest moneymaking day on Wall Street in almost a century.
Need I say more?
I agree 100%. Young people should not have pulled out their 401(k). The market will improve and we have time to recover.
What about mutual funds and stocks? I’m guessing that if all your money is invested in only that, then it may be a good thing to take some money out and place it in a personal savings account. Your thoughts?
The rule of thumb is to have at least six (6) months of expenses saved. Which they call an emergency fund. Isn’t a money market the same as a savings account? Then why take money out of that and place in a bank?
It’s proof that it’s foolish to try and time the market. Just as the market went up, it went down before that…way down. No one knew when the market would pick up again. And to me that’s the point. Some days stocks are going to be in the toilet, some days it’s going to be through the roof. The point of havings stocks and holding on to them for long period of time is that during that period, all the highs and lows tend to even out and chances are you’ll have more money when you’re ready to use it.
Great example Keith. I know people are tired of hearing that they should stick in there but it’s true.
When you answered my question about starting my 401k last month, I forwarded it to my friend who wanted to pull out of her 401k and she called me all excited because she didn’t.
Thanks Keith!
I have heard anaylsts say the market at 9000 is the correction. It was previously inflated. It’s the same as the housing market correction.
keith, your triumph was short lived as the market dropped another 600 pts in the following weeks. however, i do agree with you, it’s huge mistake to di-vest at this stage. prior to investing, you MUST determine if the investments are short or long term in nature. if long term, you’ll experience corrections but over the years you’ll manage a nice return.
CHEAP wow gold BUY wow power leveling
links of london Bracelet
Tiffany Bracelets
cheap tiffany charms go tiffany co
Very nice post, good work.
Very helpeful.
Gregor S.
Free SMS
Thanx for sharing. Very helpeful
Hey, very helpeful for me. Thank you