brownmonster
Man of Great Wisdom
Can't put 15 grand a year into a Roth
teamster 401k questions?
- Thread starter Forty6and2
- Start date
av8torntn
Well-Known Member
It's not a either Roth IRA or 401K choice. You can put the five grand into a Roth IRA then go with your 401k.
Details please.
How is that?? If I have say 50,000 dollars in the EAFE fund and it loses money for a month and when I check it, it says my balance is 43,000, didn't I just lose 7,000 dollars?? The reason I ask this is because when the Dow started taking a crap I did take my money out of the EAFE because it was taking a crap as well. Did I panic too quickly???
No, you haven't lost anything because you don't have "dollars" in a mutual fund, you have shares. In a down market, those shares may temporarily decrease in value, but you still have the same amount of shares. If you wait til the market goes back up, those shares will increase in value and you end up back on top again. The only way you lose money is if you sell those shares for less than you paid for them, ie, when the market is down. This is often referred to as "buying high and selling low", and it sounds like that is what you did.
I know it sounds counterintuitive, saying that the best time to buy stocks is when the market tanks, but once you get your head around the fact that you are purchasing shares, not just depositing money in an account, it makes sense. The people who get burned in the stock market are the ones who buy big when the market is booming (because thats when shares cost the most), then panic and sell at the first sign of a downturn (when shares are cheapest).
Next time you see the EAFE taking a crap, move that 50 grand back in
thanksNo, you haven't lost anything because you don't have "dollars" in a mutual fund, you have shares. In a down market, those shares may temporarily decrease in value, but you still have the same amount of shares. If you wait til the market goes back up, those shares will increase in value and you end up back on top again. The only way you lose money is if you sell those shares for less than you paid for them, ie, when the market is down. This is often referred to as "buying high and selling low", and it sounds like that is what you did.
I know it sounds counterintuitive, saying that the best time to buy stocks is when the market tanks, but once you get your head around the fact that you are purchasing shares, not just depositing money in an account, it makes sense. The people who get burned in the stock market are the ones who buy big when the market is booming (because thats when shares cost the most), then panic and sell at the first sign of a downturn (when shares are cheapest).
Next time you see the EAFE taking a crap, move that 50 grand back in
UpstateNYUPSer(Ret)
Well-Known Member
Jones is absolutely correct. You are buying shares, whether it be of stock or an index fund and this is the perfect time to do so as the price of these shares, in general, is much lower due to our "recession" (there are some posters here who still don't think that we are in a recession) and, when the economy rebounds (it will--our economy is cyclical in nature) you will have more shares in your fund which will be worth more as the price per share will have increased.
I have my 401k going to the S&P 400 and the EAFE. On 2/27, the price per unit (share) of the S&P was $35.24 and I was able to buy 3.53 units. On 3/05, the price was $33.91 and I was able to buy 3.75 units. Keep in mind that my elective witdrawal did not change: 20% of my pre-tax income divided 50/50 between the 2 funds. The only difference was the price per share fell and I was able to buy more shares for the same money. The only time that this will matter is when I am ready to transfer money from these funds.
Using the above data, the shares I purchased on 3/05 cost me $127.16 and using today's unit price of $35.88 would have cost me $134.55 so I made $7.41 on just that one transaction.
I have my 401k going to the S&P 400 and the EAFE. On 2/27, the price per unit (share) of the S&P was $35.24 and I was able to buy 3.53 units. On 3/05, the price was $33.91 and I was able to buy 3.75 units. Keep in mind that my elective witdrawal did not change: 20% of my pre-tax income divided 50/50 between the 2 funds. The only difference was the price per share fell and I was able to buy more shares for the same money. The only time that this will matter is when I am ready to transfer money from these funds.
Using the above data, the shares I purchased on 3/05 cost me $127.16 and using today's unit price of $35.88 would have cost me $134.55 so I made $7.41 on just that one transaction.
Great post man. Couldn't have said it better. Perfect.No, you haven't lost anything because you don't have "dollars" in a mutual fund, you have shares. In a down market, those shares may temporarily decrease in value, but you still have the same amount of shares. If you wait til the market goes back up, those shares will increase in value and you end up back on top again. The only way you lose money is if you sell those shares for less than you paid for them, ie, when the market is down. This is often referred to as "buying high and selling low", and it sounds like that is what you did.
I know it sounds counterintuitive, saying that the best time to buy stocks is when the market tanks, but once you get your head around the fact that you are purchasing shares, not just depositing money in an account, it makes sense. The people who get burned in the stock market are the ones who buy big when the market is booming (because thats when shares cost the most), then panic and sell at the first sign of a downturn (when shares are cheapest).
Next time you see the EAFE taking a crap, move that 50 grand back in
UpstateNYUPSer(Ret)
Well-Known Member
Just wanted to update this post. The numbers on the S&P continue to rise, crossing the $37/unit mark, so you can see where it pays to invest when the market is down. While it may appear that you are losing money as your account balances continue to dwindle, shares/units purchased when the prices are down will have more value when the prices go up. I purchased units for as low as $31/unit and now they are valued at $37/unit, which may not sound like that big of a gain but I have nearly 600 units so that is $3,600. Of course, not all of the units were purchased at $31 but I would have to estimate that I am up $2k just in the S&P and $6k overall just in the past few months.
Buy low, sell high.
Buy low, sell high.
mountaingoat
Well-Known Member
You don't know how many people end up doing just the opposite. They get caught up in the emotion of the market. They see that a fund is goign down so they sell to get out of it (selling low). They see that everyone is investing in the hot stock fund, so they buy because they see that it has posted tremendous gains over the past three years (they're buying high).
Best strategy for the long haul - buy the same $ amount of a cheap index fund that tracks the market every month. Diversify among Large Cap, Small Cap, and International. Rebalance at least once a year.
UpstateNYUPSer(Ret)
Well-Known Member
Buy low, sell high.
If anyone has been on the sidelines waiting to get in to the stock market or to increase their 401K deferral %, you may not find a better time than right now. There are many, many tremendous values out there in the market. Also, increased 401K contributions will allow you to buy more shares at a lower price which will realize tremendous gains when the market turns around, and it will as economies are cyclical in nature.
If anyone has been on the sidelines waiting to get in to the stock market or to increase their 401K deferral %, you may not find a better time than right now. There are many, many tremendous values out there in the market. Also, increased 401K contributions will allow you to buy more shares at a lower price which will realize tremendous gains when the market turns around, and it will as economies are cyclical in nature.
UpstateNYUPSer(Ret)
Well-Known Member
Good idea. I was actually talking more general and I usually target so-called "penny stocks". I recently increased my 401K from 20 to 25% (35% is just a bit too much of a hit each week--my mortgage company wants to get paid each month--bastards) and the timing couldn't be better.
UPS crept back above $60 today but the July 22 report should bring it back down, maybe close to $50, probably between $52-53. If you do payroll deduction you get 10% off of the lowest price of the quarter so that would be ideal.
But Benefits Are Great!
Just Words On A Screen
I could not agree more.
From what I've seen in the funds offerred in the Teamsters 401K, all of the funds are down - for the short term. I set up 10% of my income to go to the most aggressive funds they offer. It is classic buy low, sell high.
Most common mistake new investors make (in my humble opinion only) is they read investment magazines trying to find which fund has had the most gain, then they invest in that fund.
UpstateNYUPSer(Ret)
Well-Known Member
But Benefits Are Great!
Just Words On A Screen
I'm sure you've seen the old research they have done - they took a seasoned finance person, who got to pick 5 stocks based on analysis, homework, research. Then they had a monkey throw darts at the Wall Street Journal. They have done this multiple times over the years. The monkey always beats the analyst in performance.
.
UpstateNYUPSer(Ret)
Well-Known Member
Are you calling Jim Cramer a monkey?
helenofcalifornia
Well-Known Member
I have been off work for some time now. (Going back soon -yeah!!!!) I switched everything I had in my 401K funds to stable value fund last fall when the market was starting to "act up." I have had no money go into my 401K fund since I went off, but yet have made about $6,000 on my money. I know that a lot of people believe that you should have money in more aggressive funds at these times, because when the market goes up, you don't want to miss the bump. All I gotta say, is while maybe not making as much money as those that are more aggressive, I have not been losing money and I am worry-free with this chaotic market. When the market dropped 300 points on Thursday and 100 points on Friday, I was not sweating bullets.
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