Is Your 401k still in Cash?
If your 401k is in cash, you are not alone. Millions of investors have turned to cash since the market peaked in
October of 2007. Many prospective clients I have seen or spoken to recently have their retirement account in the
money fund.
It would be great if they had all turned to cash when losses were still modest, but they didn’t. Most of the selling
was done each time the market hit new lows. If you are one of these people who have locked in losses of 50% or\
more, what do you do now?
The first thing to do differently is to have an actual plan. Many retirement accounts I see are invested in 3 or 4
mutual funds, typically all in the same investment category. People tend to buy what has done best recently, and
funds will perform similarly to other funds with the same types of investments. So when large cap growth has done
best in the previous 12 months, people will buy the 3 or 4 fund large cap growth funds available to them.
People buy these 3 or 4 funds either when they start their job or when their employer switches their plan. Most
never evaluate, change, or even re-balance them. Keeping a few undiversified funds on autopilot for years is a sure
way to develop the 50-60% losses I have seen. Selling in a panic because you don’t have a plan locks in the losses.
A simple plan would have cut those losses in half or even better for many people. If you are not sure what your
plan should be, or where you should go from here, please give us a call so you can get your retirement plan back on
track.
©2006-2011 Yardley Wealth Management, LLC. All rights reserved.
If your 401k is in cash, you are not alone. Millions of investors have turned to cash since the market peaked in
October of 2007. Many prospective clients I have seen or spoken to recently have their retirement account in the
money fund.
It would be great if they had all turned to cash when losses were still modest, but they didn’t. Most of the selling
was done each time the market hit new lows. If you are one of these people who have locked in losses of 50% or\
more, what do you do now?
The first thing to do differently is to have an actual plan. Many retirement accounts I see are invested in 3 or 4
mutual funds, typically all in the same investment category. People tend to buy what has done best recently, and
funds will perform similarly to other funds with the same types of investments. So when large cap growth has done
best in the previous 12 months, people will buy the 3 or 4 fund large cap growth funds available to them.
People buy these 3 or 4 funds either when they start their job or when their employer switches their plan. Most
never evaluate, change, or even re-balance them. Keeping a few undiversified funds on autopilot for years is a sure
way to develop the 50-60% losses I have seen. Selling in a panic because you don’t have a plan locks in the losses.
A simple plan would have cut those losses in half or even better for many people. If you are not sure what your
plan should be, or where you should go from here, please give us a call so you can get your retirement plan back on
track.
©2006-2011 Yardley Wealth Management, LLC. All rights reserved.
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Michael J. Garry, CFP®, JD/MBA, owner of Yardley Wealth Management, LLC,
is an independent Financial Advisor who provides Fee-Only financial planning
services and investment management in Newtown, PA.
is an independent Financial Advisor who provides Fee-Only financial planning
services and investment management in Newtown, PA.
| Address: 41 University Drive Suite 400, Newtown, PA 18940 Phone: 267-573-1019 Toll free: 877-251-4393 Fax: 267-604-9164 mgarry@yardleywealth.net |