Friday, October 17, 2008

Interesting, easy 401K investment strategy

Picked this up from another site-

The following course of action is doable by most investors reading on this forum, if they have a 401K. Let's say you have access to three different actively managed capital appreciation goal mutual funds. You select one to start to invest in. You begin biweekly investing. You use the computer and about monthly or quarterly on Yahoo Finance, use "compare" charts with your fund, the other funds and the S&P 500. If your fund is lagging over a quarter or half year, why stay with it? Switch to a better performing one. No tax involved...just the click of a mouse. Don't want to switch, then change your payroll deductions to the best performing fund and continue from there.

In addition, anytime you read, see or hear that the stock market is hitting new highs...records being set, and everyone discussing how much money they are making, go down to your employee relations office and change your future payroll deductions to be anywhere from 50 to 100% bond funds.

And when you hear that the stock market is down 10% or more, switch payroll deductions back to 100% stock mutual funds. Furthermore, if you hear we are in a bear market, down 20% or more (like now), switch your current bond fund holdings to stock mutual funds, if your portfolio is $100,000 or less. If your portfolio is from $100,000 to $200,000, switch 50% of your bond holdings to stock funds. Above $200,000, reallocate per your portfolio allocation plan, biased towards high end for stock fund holdings.

This is perhaps a way of incorporating Jack Bogle's words of "caution" we hear at certain market peaks...and Warren Buffets advisory's regarding buying 100% equities at market lower points.

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