I heart the stock market is unsable currently. How will this affect my 403B?

Question

A couple of weeks ago, they said the market was doing really well for those of us who have 403B and 401K's, but now I hear things are going down hill and I have no clue what that means. The Lincoln Financial group is handling my 403B. Do they know what they are doing? I have about 20 yrs before I retire.

Answer 1

The stock market is always performing on the same concept, sometimes it is up and sometimes it is down. The key to investing is staying in the market during all types of cycles. Dollar Cost Averaging is the best way to invest in the market, but there are alternatives that you might want to investigate. There are Equity Indexed Annuities that are paying an initial Bonus on new accounts that are opened for Retirement purposes. Some of theses annuities will pay 5% up to 15% immediately on your money. Another aspect of these annuities is a feature that allows you to participate during the "good" cycles and "pulls you out" during the bad cycles. Also, some EIA(Equity Index Annuities) will also pay a Bonus on additional contributions during the first 3 to 5 years of the opening of the account. Along with the Bonus, you will also be able to allocate your money into a Fixed account, NASDAQ100 or S&P500 to give yourself a chance to participate in the gains of the market.

I hope this helps.

Roger

Answer 2

The market has moved downward in the last couple of weeks because the increase failure rate of low credit quality mortgages has (1) impacted in particular hedge funds, causing those funds (which invest a tremendous amount of money) to become more conservative generally and reduce positions throughout the market and (2) caused lenders to be less aggressive in lending, which has caused concern among M&A buyers who rely on heavy leverage to finance acquisitions.

If you have 20 years left, it should not be a concern -- this is a correction that should be corrected over time. While equity markets may go up and down from day to day -- over a long time equity markets will generate superior returns for you.

Answer 3

Indirectly, yes it will impact your fund since some of the funds who have exposure to (direct/indirect) subprime mortgage is facing a liquidity crunch will have to either infuse more cash inter system or unload some stocks. Now, when they unload stocks from their portfolio they will necessarily sell first those that are not loosing - meaning they are locking their profit - hence you see even blue chip stocks are going down. The deluge of selling plus the fear of recession will impact the market.
The bet is that funds holding the money loosing subprime mortagage related securities will hold out and ride the tide until the market stabilizes and asset pricing is back to normal.

Hence, the moral of the story is that don't panic. Leave hedge fund guys worry about the market, they made tons of money but I guess it is payback time.

Answer 4

In the long-term scheme of things, this little blip in the market will be hardly noticable.

The real question is, "do you know what you are doing?" Your Lincoln Financial group will only invest in the mutual funds that you have selected. Mutual funds will pretty much capture the overall market movement, depending on the asset class they invest in. In other words, it does not matter which specific stocks the fund managers pick, since a mutual fund is designed to capture the market's average return anyway.

What is important from your perspective is the asset allocation you have chosen and the costs you incur. Academic studies show that these two factors determine most of your risk and return over the long run. So, this is what you should focus on. Your stock to bond ratio is the most important decision in your asset allocation plan. Your choice to purchase no-load mutual funds with no 12b-1 fees is the most important decision regarding costs.

Do not worry about current market conditions, market predictions, past returns of a mutual fund ... those factors do not make a significant difference. People tend to over-react and the market is responding to this.

If you are worried about your retirement plan, then quell those fears by educating yourself on the basics of stocks, bonds, and mutual funds. This is info that can be used throughout the rest of your life. Here are 3 good sources to help you:

1) Book: Mutual Funds for Dummies, by Eric Tyson. I highly recommend this book.
2) Book: The Boglehead's Guide to Investing
3) My free downloadable book at http://www.invest-for-retirement.com which is designed for beginners.

Let me leave you with my favorite quote from my favorite author, William Bernstein, in his book, The Four Pillars of Investing: "A young person should get down on her knees and pray for a stock market crash so she can then purchase her retirement shares at firesale prices."

Or consider another quote from Bernstein, in his book, The Intelligent Asset Allocator: "The ability to ignore current market conditions is one of an investor's greatest weapons."

Or consider the words of Ben Graham, The "father" of value investing: "The fact that stock prices have fallen only makes them safer, not riskier."

Answer 5

happydawg, the stock market has traditionally earned just below 11% annually so not to worry but think as i do......i hope it goes down a little more and doesn't rebound for about 5-7 years. this way we can "buy low" with our payroll deferrals for awhile and THEN let the market rebound and exponentially grow our balances before we are ready to "sell" by taking distributions at retirement age.

Answer 6

It will level out in a few months. Don't worry about it. But, to save yourself the headache and stress, don't open any statements for a few months. :)