| how will a market crash affect my 401k |
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monoblanco
First Time Poster
Cash: $ 0.25
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Joined: 19 Aug 2005
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| how will a market crash affect my 401k |
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How will a market crash affect my 401k
Is my 401ks performance are directly proportional to the stock market's performance?
My 401k investment allocations are very diverse. I allocate 2 to 5 percent to each fund available. (there's over 15 types of funds) My employer uses Goldman Sachs.
Is anyone here investing in foreign markets?
I understand a global economy creates dependencies between markets. I wonder to what extent an American market crash will affect Europe.
I just wonder whether it's a good idea tto pull some money away and into something else.
Thank you in advance.
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Fri Aug 19, 2005 8:27 pm |
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David Briggs
Senior Member
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In portfolio management, you cannot diversify systematic risk away. This is known as market risk, and an overall decline in stock prices will result in a decline in the value of a portfolio consisting of equities.
Internationally, stock markets behave with a fair degree of disconnection. Japan has been in a bear market for years. So it is certainly possibly to reduce your correlation to the U.S. stock market by owning securities of foreign companies.
Also consider fixed income securities and shares of funds which concentrate in raw materials players. Oil will always be consumed no matter whose economy is hot at the moment.
~~David
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Sat Aug 20, 2005 4:38 pm |
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mlathe
Contributing Member
Cash: $ 6.15
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Joined: 26 Aug 2005
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quote:
I allocate 2 to 5 percent to each fund available.
Are you saying that your company gives you a family of funds, and you invest in every one of them? Diversification is great, but you can often get it with 3-5 funds.
Most everyone agrees that building a strong core (perhaps something as simple as a S&P Index fund (cheap and some people think its the best way to go: http://www.fool.com/mutualfunds/indexfunds/indexfunds01.htm)
Then add some riskier funds for some large growth. E.g. internation funds (maybe emerging markets (normally Asia)) or small caps.
Lastly add some stability. Get some bond funds.
--Matthias
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Fri Aug 26, 2005 2:46 am |
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Rolo
Yo' Daddy
Cash: $ 309.70
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Location: Colorado/Florida
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With that many funds, you likely have a lot of duplication. In the end, you really do not know how much you have in what.
Look for "Investing 101". A weekend of effort will save you a lot of hassle and money. Broadly balancing a portfolio is not hard at all. Really, one weekend...an easy weekend, too.
Also, you must overcome your fear of risk. Risk-averse people generally do not do well. Emotion has no place in money-related decisions...Or in any decision that I can think of for that matter. Think about it: most money-quandaries' roots are traced back to an emotion (greed, fear, laziness).
Adding more volatile, more risky funds to your portfolio will, as David alluded to, REDUCE your overall risk. Note: that doesn't mean buy everything or limit yourself to 5% of any one thing.
Also, read "The Truth About Money" by Ric Edelman. You'll get the complete picture, be entertained, an really, know enough about everything investing.
"Expect me when you see me."
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Wed Aug 31, 2005 4:19 am |
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