I am 29 and have a 401k with Merrill Lynch through the company I work for. My investment strategy has been to utilize the "Aggressive" goal manager for the past six years since I started with my company.

My question... Let's say things have officially hit the fan and the 20% or greater correction is in full swing and the bear market is here to stay for several years, what is a wise strategy to use at this point? Would you change your investment strategy to a more conservative goal manger in attempts to ride/time the market or continue buying with this aggressive approach even though the market is going down (hypothetically of course). Thanks

Having an asset allocation you will stick with in high markets and low markets is what you need.

Timing the market doesn't work.

Unless you are retiring at 35, set your investment strategy to the aggressive plan and check in on it in about 15-20 years. Then you can start worrying about what the market is doing in the short term.

Good time to buy in if some of your funds dip for a little bit.

Everyones comment is correct - leave it aggressive. Few things - first, don't change it to conservative after a 20% drop. Do it before. Because you will never know and be wrong way more times than right, leave it alone. On average, you will have 3 years up and 1 year down.

Dollar Cost Average (DCA).

Re-balance as needed to maintain your desired allocations.

^ this and time are your friends

You are young so can afford to play faster and looser for the next 5-10 years.

Certainly if you feel things are overheated take some off, but not necessarily all, off the table and put it back on at a lower price if you can. It's always fun to make the same money twice or more. In general if you are going to dial back, Sept and esp Oct are the months to have a bit extra on the sidelines to refuel for end of year rallies if the occur.

If you pull some off the table, do it in one chunk, roll it back in by thirds to give yourself a chance to be early on a bottom.

Playing in mutual fund can be restrictive as there is minimum times now you have to leave money in a fund before pulling it....

in my opinion - if you're under 45-50 and have a 401k (aka dollar cost avg) you should be salivating right now.... great market for us...

I'm only 23 (engineering major), and I don't really know anything about investing and where to put my money, but I want to start learning. I know I have a 401k with my employer, and have money scattered around, but don't know if it's an aggressive plan or not.

Does anyone have any good reading on how to start and where I should be looking to put my money?

Aggie1391,

A great place to start is to read the blog/wiki at Betterment. The key takeaways:

• As many others have mentioned: the longer your time horizon (you're 23, so your horizon is 40+ yrs), the riskier the portfolio should be.
• Don't look at or touch your portfolio, other than to re-balance to your targeted asset allocation. Most professional investors can't beat the market, so what makes you think you have better insight? Behavioral Finance studies show us that our own actions tend to contribute negative performance over the long-term (e.g. reducing risk after corrections, increasing risk after large run-ups).
• Use efficient investment vehicles. Unfortunately, most 401(k) plans offered by employers are administered by mutual fund companies, and the investment offerings tend to be actively managed mutual funds offered by the administrator (as opposed to ETFs or passive MFs). When at all possible, construct your portfolio using index ETFs or an index mutal fund, these tend to have much lower fees which can reduce the drag on portfolio performance.

Timing the market is a fool's errand. You not only have to guess right on the time to sell, but also the the time to buy. I know of no one that can prove they have done it effectively over time.

Market drops are a gift to accumulators, if anything, boost your contributions, your IRA, or taxable accounts if you think the market is on sale. You'll be richer down the road.

The thing no one thinks about when trying to time things is - when will you know to get back in if you pull back?

Let's say you go conservative now because you think the market is gonna go down 20%. What do you think your state of mind will be when it is down 20%? Will you think - hey it is down like I was afraid it would be. But because the market sentiment will be doom and gloom, I am 95% confident you won't bet back in then. You will wait until the market starts rising. Maybe rising a lot. You won't have the courage to get back in with just a 5% upward movement. You'll wait for 5% more. Or 10% more. Or even more.

The point is trying to time the market is a dead end. Make sure your investments are properly diversified. A young person should stay the course.

quote:

---

Unless you are retiring at 35, set your investment strategy to the aggressive plan and check in on it in about 15-20 years. Then you can start worrying about what the market is doing in the short term.

---

This

24 year old here. Any reason not to just plonk my contributions down in a Vanguard Target 2055 fund?

FWIW, I'm making contributions equal to the maximum amount that is employer-matched. Comes out to 9% of salary total.

No, not really. I tend to be suspect of the target date funds due to fee layering, but at the end of the day, given the limited investment options included in most 401(k) plans, it is likely the most efficient way for you to obtain the appropriate diversification and asset allocation for your time horizon.