Isn't this a perfect time to be pumping the 401k?

I keep hearing people talking about how its a terrible time to be buying stock...and I keep thinking, this is an ideal time...stocks are cheap as hell. I sure like buying up the S&P at $1100 a lot better than I did at $1550 last year.

Of course I understand if one is about to retire this is brutal, but I am in my 30s and retirement is so far off I am only interested in building stockpiling my 401k right now. Am I missing something? Is this not dollar cost averaging at its best? What gives?

About 2 years after 9/11, I had about a $35,000 401k from a previous company that I hadn't rolled over to my current employer, even though I had been there for about 5 years. Since the market was in the tank and couldn't go any lower (it had actually stabilized and was beginning to climb), I rolled that money into my new company's 401k.

I chose the riskier stocks, because I figured the market would go no where but up. I also invested an additional $5000 or so a year with an employer match of about $2500. By March of 2007, it was up to over $130K.

In March of 2007, the stock market took a 1-day dive of about 350 points. Fearing what happened to the riskier stock funds after 9/11, I immediately transferred all of my money into a money market fund. Since then, I have gotten about a 4% (3% annual) rate of return. But, the risky stock fund I had gotten out of has lost 30% this year since January 1. And, my 401k is now at $140K, instead of just over $100K had I left the money in that fund.

The key to stocks - obviously - is buy low and sell high. But, you also have to evaluate how much risk you're willing to take and factor in what you think the market is going to do. You also have to look at how long you plan on being in a given investment.

In your 30s, you probably have about 30 or more years to go until retirement. So, you can gamble on the high-risk, high-reward stock funds, especially with stock prices so low (although, I think I would wait until the market stabilizes over the next month or so to pull the trigger). Since I'm in my mid 40s, I can also get into somewhat riskier investments. But, I'll probably temper the investment in the high-risk stock funds by splitting my investments up into a variety of vehicles. But, only when I'm sure the market has bottomed out and stabilized.

And, I'm not that concerned about hitting it exactly right at rock bottom. Just low enough that I can buy low and go long over the next couple decades (or until the next stock market crunch).

I have to agree that the best time to buy is when there is blood on the streets. It may not be over yet but people who try to time the markets get left out in the cold. Im only 25 and I am not going to panic like everyone else. Just keep with your plan and I think things will turn out for the better.

A falling stock market is always the best time to get into the market.

Buy low, sell high.

To answer, bingo.

Yes, dollar cost averaging is they way to go, when you have 30 years until retirement. People who had hoped to retire in the very near future are watching their 401K dwindle before before their eyes. Only the most conservative funds (with the lowest returns) are making money right now.

Grandpa

Well that depends, do you think stocks will go lower? If you did then just wait to pile into stocks or 401k. One more thing to think about, we closed at about where the stock market was in 1998. That is 10 years of 0% appreciation, which means you were better off putting that money into a money market, CDs, anything that paid interest. On top of that, if you were dollar-cost averaging, you'd be down pretty big right now.

Investing is risky business, and there is no guarantee stocks go up over time. WallStreet likes everyone to blindly dump their money into the market, but doesn't mean it's good for you. It's worth doing some research, and picking the right investments. Also, cash is a position as well, in many times it is good enough to not lose money, like right now! Make your own decisions, but I am counting that things will get far worse before they get better.

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