Time to stop investing in 401K?

Question

I am 28 and have been investing in 401K's since my first job at the age of 21. I have lost money every year. Good economy. Bad econony,. I have done money market, done managed risk, changed plans and risk levels. No matter what I do, it keeps losing. Every change I research the 5 10 and 15 year averages and they always do great until I invest. I'm losing faith in the 401K process. I just took a new job and I wont be vested until 3 years of service, and not 100% until 5 years. I dont plan to stay there that long. Right now they ONLY fund that is making money under my employers plan in the money market which is making 1/4 of 1% interest. I know yanking the cash out is an automatic loss but is it time to stop putting money in the plan an investing it elsewhere instead (CD's maybe?).... Thoughts?

I dont want to pay the 10% penalty so I wont cash out.

Nope! Not joking! Everywhere I have rolled they money I come in on the eve of a downturn in their returns. Why do you think I've had it?! Everyone else is making $ and I'm losing!!!

Answer 1

what are you investing in and what choices does your employer give you...if you have vanguard/fidelity or t rowe price as options go for them and within them stick with a stock mutual funds...sp 500 being an excellent overall choice...but even money markets or bond funds are paying 5%+ currenlty so you should not be losing money

Answer 2

A 401K is a long term investment. That means if you look at it in year 1 and then again in year 10, it should have increased in value by at least 10%. In another 10 years, another 10%.

First, I suspect you have been changing your selections too frequently. A 401K should mostly be left alone to mature slowly.

Second, a money market fund really has no place in your investment strategy at your age. You need to remain at least 80% in stock market funds.

Third, you should avoid managed funds if indexed funds are available, and definitely high risk sectors. You will do better if you put the money mostly into a broad stock market fund (like the Vanguard Total Stock Market Fund) and leave it there.

Your main problem is that you don't understand your risk tolerance. In the market things go down from time to time - sometimes for a long period of time. Then you buy more; you don't sell out of that fund. Eventually that investment will come back up, and the shares you bought cheaply will increase in value.

CDs and money markets are for old people - over 60. Stay with equities, and roll the money over into a new IRA if you can't roll it into another 401K.

Answer 3

Past performance is no guarantee for future performance.

401(k) are great if your employer is matching your contributions, but otherwise not much different from an IRA.

If there is no matching benefit, I would take the same amount and open an IRA - it will be pre-tax money like the 401(k) - and look at other investment vehicles in lieu of mutual funds.

You will need to start learning about what investing is other than putting your money in a fund that someone else manages.

The market has risk - financial literacy reduces that risk by enabling you to make informed choices.

Answer 4

Your employers must have some really terrible choices in their 401k. I can not even conceive that it is possible that a 401k could have lost money during the last 5 years. It is almost impossible. You are not kidding us are you?

Role your 401k into a traditional IRA with either Fidelity, T Rowe Price, or Vanguard. Once there invest the money into one of their Target date retirement funds. For you that would be 2030 more or less. Now certainly there will be some years when the fund will not make money but overall it should net you about 8% to 10% annually.

Answer 5

It's really really hard to have lost money that consistently since, say, 1Q 2003. I'd love to hear what your plan offers that is THAT bad.

Perhaps the problem might that you're chasing performance -- that is, that you keep switching to what was hot LAST year, instead of diversifying and spreading your investment among a number of sub-markets. This is the failing of a number of novice investors. If that sounds sort of familiar, consider picking a sensible, diversified asset allocation plan from among the best of your 401k choices and just sticking to that. Or, as another poster suggested, put all of your money into a target retirement date fund like Fidelity Freedom's 20xx series, if that's available to you.

Answer 6

It's the time to stop and start think about what you have been doing in the past 7 years, try to put some head line on the route causes of that results, start make analysis on reasons.

You seem to be the kind of unlucky person, Are you Libra?
May be you need to start making the opposite.

You seem also to be kind of a person whom want to do investment just because its fobia. I would advise you to stop your investment for say 3 months, monitor the market, seek advise from the experts , I'm afraid to don't know how to make the analysis and you get the wrong results. Stop your investing action immediately.

Answer 7

Have you tried putting it in the S&P 500? I retired at 52 and made money every year until 9/11 happened. Since then Ive made it all back and more. Most mutual funds make money--not sure what happened to you.

Answer 8

give up paying for and advertising and commence making an investment. sell while the shares are up, no longer while they're down. Noone ever made money from panic advertising. purchase and carry shares that pay a dividend. do no longer persist with the fads as those shares are already extreme priced. look into the canine of the Dow. those are shares that have the backside fees in comarison to their returns by dividends.