We all know that people are taking a beating in the stock market. I hear people at work and online talk about their 401k with a certain sense of fatalism, as if they have two options: (a) watch it collapse or (b) stop contributing and withdraw their funds. I’m not at all sure that people realize the flexibility that they have in allocating their own money.
I’m not an expert in the world of finance or retirmement planning, but I watch the market and I usually read a weekly portfolio report from Smith Barney. Based on these inputs and what my hunch is about the market, I move my funds around a lot. Once you have an online account, you can generally move your money around whenever you want to – given that there is some lag based on when you click OK and when the market opens the next day.
For example, I avoided some of the worst bloodletting after the .com implosion, the Enron debacle and the latest recession by simply moving my funds into bond or money market funds and out of equities. There used to be financial ‘experts’ who said that you need to just stay allocated aggressively while young and that it will all pan out in the end – I don’t know if they are still around anymore. The last decade should prove that theory to be rubbish.
You should be able to move your money into and out of money markets or bond fund whenever you want to and then rotate it back into equities when things stabilize. Yes, you may miss some upside when an upswing happens, but you may also miss a lot of carnage in the stock market. Whatever happens, people should know that they can control where their money is. They aren’t completely at the mercy of the fluctuating equities markets.