Is now a good time to reallocate 401K funds?

qwerty_IHB

qwerty_IHB

New member
So earlier this year i was down about 25% in my 401K, all of market value has been recovered (the market value actually increased back to what it was vs increasing due to my contributions and company match). Would now be a good time to get out of the various funds and put all my 401K money in a cash type fund? This seems like a good time to transfer everything into cash, keep contributing, then maybe when the DOW gets back down to 8000 or so get back into stock funds? There appears to be more downside than upside right now. Im 32, so i probably shouldnt even bother with trying to time this particular market, but curious if any of you had any ideas or were reallocating your 401K funds at this time to try and profit from this market.



Thanks in advance.
 
[quote author="qwerty" date=1249534015]So earlier this year i was down about 25% in my 401K, all of market value has been recovered (the market value actually increased back to what it was vs increasing due to my contributions and company match). Would now be a good time to get out of the various funds and put all my 401K money in a cash type fund? This seems like a good time to transfer everything into cash, keep contributing, then maybe when the DOW gets back down to 8000 or so get back into stock funds? There appears to be more downside than upside right now. Im 32, so i probably shouldnt even bother with trying to time this particular market, but curious if any of you had any ideas or were reallocating your 401K funds at this time to try and profit from this market.



Thanks in advance.</blockquote>




Interesting you brought this up because I did exactly that this morning. I am 26 and was invested in aggressive funds. My account was up 18% so I threw it all into cash. Like you said, its not about "timing the markets," but at the same time, there is a good chance the market is heading nowhere but down in the near future. Once it drops a bunch, I plan on reinvesting into the aggressive fund again.
 
Since you don't have to pay taxes on your gains in a 401k account, it's perfectly fine to capture some of your gains. I'm surprised that many people do only buy-and-hold in their tax-deferred accounts. Those are exactly the accounts where active asset management is a good idea. Of course, the timing is everything, and you're on your own there.



Just to clarify, by "active management" I do not mean day-trading but shifting funds every few months if you think the market has moved too much. Sometimes things just get too weird. Let's say your fund goes up 30% in one month. Would you expect to get 30% every month? Let's say it goes 50% in 5 months in the middle of the deepest recession in the last 70 years. Would you think that that's a normal kind of return and expect to see the same thing for the next 5 months? Sometimes, you'd just sleep better if you took the money and ran. Not having to pay taxes on your gains can make even capturing 10% fluctuations worth while. Of course, most funds have limits on how often you can sell or re-buy. Something like a 2 month wait period is normal, but that's OK for the kind of active management that I'm advocating.
 
[quote author="sad.machine" date=1250046643]get out. all cash (or probbly money market fund)</blockquote>


Yeah I got out yesterday morning, transferred everything to a stable value fund.
 
[quote author="dcoffield" date=1250059148]Interesting. Why are you all moving out of the market? Something you know or just a feeling?</blockquote>


Its not one thing that made me wanted to get out of stocks in my 401K account, just a gut feel that the markets are heading down.
 
[quote author="qwerty" date=1250076536][quote author="dcoffield" date=1250059148]Interesting. Why are you all moving out of the market? Something you know or just a feeling?</blockquote>


Its not one thing that made me wanted to get out of stocks in my 401K account, just a gut feel that the markets are heading down.</blockquote>


Since you mentioned stable value fund(SVF) and I work for a major stable value wrap issuer (insure the stable value fund), I knew for a fact most SVF are underwater (market value/book value < 100%), there is a risk you might lose money in your SVF. Take Lehman brother for example, when they filed for BK, their employee lost 2 cents on the dollar in their SVF. I'm not saying the same thing will happen to your company, but just be aware.

I have all my 401k money in cash and has been urging everyone to do so because of the following reasons



1. This rally is manufactured/rigged/pumped w/o any significant foundamenals behind it. Typically when the market bottom out during a recession, S&P PE typically are in the high single digit (6-8), we are at over 18 today, even back in March, it was 11, one of the reason I still not fully convinced the March low is THE low. We never had a V-shaped recovery in the past, unless you believe S&P will shoot straight back up to 1500, move your money out of equities before you lose another 50%.



2. I need to see job creation + less foreclosure + housing price and dollar stablize before I become a bull



3. Anyone still worries about CMBS, credit card, student loans, record bank failures, California BK, GS front running trades, no real earnings improvement, high oil price, govt printing $trillions and spend the money we don't have....... I can go on and on.
 
looks like another good rally today... it will be good to exchange some shares today... and buy back if the feds finally raise the rates in Sept... is there next meeting?
 
[quote author="BondTrader" date=1250115323][quote author="qwerty" date=1250076536][quote author="dcoffield" date=1250059148]Interesting. Why are you all moving out of the market? Something you know or just a feeling?</blockquote>


Its not one thing that made me wanted to get out of stocks in my 401K account, just a gut feel that the markets are heading down.</blockquote>


Since you mentioned stable value fund(SVF) and I work for a major stable value wrap issuer (insure the stable value fund), I knew for a fact most SVF are underwater (market value/book value < 100%), there is a risk you might lose money in your SVF. Take Lehman brother for example, when they filed for BK, their employee lost 2 cents on the dollar in their SVF. I'm not saying the same thing will happen to your company, but just be aware.

I have all my 401k money in cash and has been urging everyone to do so because of the following reasons

1. This rally is manufactured/rigged/pumped w/o any significant foundamenals behind it. Typically when the market bottom out during a recession, S&P PE typically are in the high single digit (6-8), we are at over 18 today, even back in March, it was 11, one of the reason I still not fully convinced the March low is THE low. We never had a V-shaped recovery in the past, unless you believe S&P will shoot straight back up to 1500, move your money out of equities before you lose another 50%.

2. I need to see job creation + less foreclosure + housing price and dollar stablize before I become a bull

3. Anyone still worries about CMBS, credit card, student loans, record bank failures, California BK, GS front running trades, no real earnings improvement, high oil price, govt printing $trillions and spend the money we don't have....... I can go on and on.</blockquote>


I am aware that an SVF can lose value, however, our 401K plan does not have a cash option, at least that im aware of, when i was reallocating my funds into the SVF, a cash balance was never an option. Ill ask our HR admin folks today just to double check but i dont believe we have a cash option.
 
[quote author="qwerty" date=1250122020][quote author="BondTrader" date=1250115323][quote author="qwerty" date=1250076536][quote author="dcoffield" date=1250059148]Interesting. Why are you all moving out of the market? Something you know or just a feeling?</blockquote>


Its not one thing that made me wanted to get out of stocks in my 401K account, just a gut feel that the markets are heading down.</blockquote>


Since you mentioned stable value fund(SVF) and I work for a major stable value wrap issuer (insure the stable value fund), I knew for a fact most SVF are underwater (market value/book value < 100%), there is a risk you might lose money in your SVF. Take Lehman brother for example, when they filed for BK, their employee lost 2 cents on the dollar in their SVF. I'm not saying the same thing will happen to your company, but just be aware.

I have all my 401k money in cash and has been urging everyone to do so because of the following reasons

1. This rally is manufactured/rigged/pumped w/o any significant foundamenals behind it. Typically when the market bottom out during a recession, S&P PE typically are in the high single digit (6-8), we are at over 18 today, even back in March, it was 11, one of the reason I still not fully convinced the March low is THE low. We never had a V-shaped recovery in the past, unless you believe S&P will shoot straight back up to 1500, move your money out of equities before you lose another 50%.

2. I need to see job creation + less foreclosure + housing price and dollar stablize before I become a bull

3. Anyone still worries about CMBS, credit card, student loans, record bank failures, California BK, GS front running trades, no real earnings improvement, high oil price, govt printing $trillions and spend the money we don't have....... I can go on and on.</blockquote>


I am aware that an SVF can lose value, however, our 401K plan does not have a cash option, at least that im aware of, when i was reallocating my funds into the SVF, a cash balance was never an option. Ill ask our HR admin folks today just to double check but i dont believe we have a cash option.</blockquote>


If you can find out who is your SVF manager, I can probably give you a pretty good idea how they are doing. Find out if you have a Money Market option as well as the yield on your SFV
 
[quote author="BondTrader" date=1250125695][quote author="qwerty" date=1250122020][quote author="BondTrader" date=1250115323][quote author="qwerty" date=1250076536][quote author="dcoffield" date=1250059148]Interesting. Why are you all moving out of the market? Something you know or just a feeling?</blockquote>


Its not one thing that made me wanted to get out of stocks in my 401K account, just a gut feel that the markets are heading down.</blockquote>


Since you mentioned stable value fund(SVF) and I work for a major stable value wrap issuer (insure the stable value fund), I knew for a fact most SVF are underwater (market value/book value < 100%), there is a risk you might lose money in your SVF. Take Lehman brother for example, when they filed for BK, their employee lost 2 cents on the dollar in their SVF. I'm not saying the same thing will happen to your company, but just be aware.

I have all my 401k money in cash and has been urging everyone to do so because of the following reasons

1. This rally is manufactured/rigged/pumped w/o any significant foundamenals behind it. Typically when the market bottom out during a recession, S&P PE typically are in the high single digit (6-8), we are at over 18 today, even back in March, it was 11, one of the reason I still not fully convinced the March low is THE low. We never had a V-shaped recovery in the past, unless you believe S&P will shoot straight back up to 1500, move your money out of equities before you lose another 50%.

2. I need to see job creation + less foreclosure + housing price and dollar stablize before I become a bull

3. Anyone still worries about CMBS, credit card, student loans, record bank failures, California BK, GS front running trades, no real earnings improvement, high oil price, govt printing $trillions and spend the money we don't have....... I can go on and on.</blockquote>


I am aware that an SVF can lose value, however, our 401K plan does not have a cash option, at least that im aware of, when i was reallocating my funds into the SVF, a cash balance was never an option. Ill ask our HR admin folks today just to double check but i dont believe we have a cash option.</blockquote>


If you can find out who is your SVF manager, I can probably give you a pretty good idea how they are doing. Find out if you have a Money Market option as well as the yield on your SFV</blockquote>


BondTrader, I'm going to send you a PM because I'm in the same boat. My employer doesn't have a cash option; only SVF. In November 2007, my financial planner (family member) told me to go all cash. At that time, I read through the SVF and nearly fell out of my chair when I saw that much of the fund's assets were in "financial" stocks and the SVF was considered very low risk. I called the assistance # immediately and was told that the SVF was basically my only option. So, 75% of my portfolio has been sitting in the SVF since November 2007 and I'm kicking myself for not moving at least part of it back over earlier this year. I'm going to be really mad if the market doesn't dip to near March levels again!
 
I've posted on this before. At one point the SVF in my 401k was, as I recall, >40% in MBS and other RE-related investments. But after the sh*t hit the fan they moved things around a lot. Check the prospectus again if you haven't looked at it in a while.
 
[quote author="Sunshine" date=1250164230][quote author="BondTrader" date=1250125695][quote author="qwerty" date=1250122020][quote author="BondTrader" date=1250115323][quote author="qwerty" date=1250076536][quote author="dcoffield" date=1250059148]Interesting. Why are you all moving out of the market? Something you know or just a feeling?</blockquote>


Its not one thing that made me wanted to get out of stocks in my 401K account, just a gut feel that the markets are heading down.</blockquote>


Since you mentioned stable value fund(SVF) and I work for a major stable value wrap issuer (insure the stable value fund), I knew for a fact most SVF are underwater (market value/book value < 100%), there is a risk you might lose money in your SVF. Take Lehman brother for example, when they filed for BK, their employee lost 2 cents on the dollar in their SVF. I'm not saying the same thing will happen to your company, but just be aware.

I have all my 401k money in cash and has been urging everyone to do so because of the following reasons

1. This rally is manufactured/rigged/pumped w/o any significant foundamenals behind it. Typically when the market bottom out during a recession, S&P PE typically are in the high single digit (6-8), we are at over 18 today, even back in March, it was 11, one of the reason I still not fully convinced the March low is THE low. We never had a V-shaped recovery in the past, unless you believe S&P will shoot straight back up to 1500, move your money out of equities before you lose another 50%.

2. I need to see job creation + less foreclosure + housing price and dollar stablize before I become a bull

3. Anyone still worries about CMBS, credit card, student loans, record bank failures, California BK, GS front running trades, no real earnings improvement, high oil price, govt printing $trillions and spend the money we don't have....... I can go on and on.</blockquote>


I am aware that an SVF can lose value, however, our 401K plan does not have a cash option, at least that im aware of, when i was reallocating my funds into the SVF, a cash balance was never an option. Ill ask our HR admin folks today just to double check but i dont believe we have a cash option.</blockquote>


If you can find out who is your SVF manager, I can probably give you a pretty good idea how they are doing. Find out if you have a Money Market option as well as the yield on your SFV</blockquote>


BondTrader, I'm going to send you a PM because I'm in the same boat. My employer doesn't have a cash option; only SVF. In November 2007, my financial planner (family member) told me to go all cash. At that time, I read through the SVF and nearly fell out of my chair when I saw that much of the fund's assets were in "financial" stocks and the SVF was considered very low risk. I called the assistance # immediately and was told that the SVF was basically my only option. So, 75% of my portfolio has been sitting in the SVF since November 2007 and I'm kicking myself for not moving at least part of it back over earlier this year. I'm going to be really mad if the market doesn't dip to near March levels again!</blockquote>


You did yourself a great favor to avoid the big drop. I gave the same advice to my boss, who is near retirement, back in early 08 to move everything in cash, he's pretty happy about it. So you missed a pretty flashy bear market rally, no big deal, I'm almost certain we will re-test the lows in March. Stay in cash, don't chase the rally, don't watch CNBC, lol
 
[quote author="Daedalus" date=1250170827]I've posted on this before. At one point the SVF in my 401k was, as I recall, >40% in MBS and other RE-related investments. But after the sh*t hit the fan they moved things around a lot. Check the prospectus again if you haven't looked at it in a while.</blockquote>


Based on what I witness, we wrap $25bn SVF covering all major fund managers, they are trying to derisk but at the same time don't want to take a loss on their positions, and we all knew how hard it is to sell those POS in today's market. A typically SVF in today's market is underwater for about 10%, back in March it was -20%. It will take a long time for them to get back to 100% market value/book value(MV/BV), and the crediting rate will remain low (to make up for the loss). My concern is, say interest rate on Money Market fund jump up due to inflation down the road and make SVF unattracctive due to its low rates, it will create a run on the fund and whoever get out last face the potential risk of principal loss if the SVF MV/BV is still below 100% and the wrap issuers don't cover events like run on the funds.
 
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