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Julien43
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Cash: $ 0.45

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Joined: 28 Nov 2013

401K tactic opinions

Hello
I am seeking opinions on a specific tactic, given the stimulus inflated stock market.

My thought is that it would make sense to borrow half of my balance and put it in savings until the market falls. Then pay back the loan.

Thanks for taking the time to read my post.

Thu Nov 28, 2013 4:28 pm

coaster
Senior Advisor

Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin

Your proposed tactic has a name ... "Market-Timing" ... and here's an article on a reputable web site that explains why it's not a good idea:

http://money.cnn.com/2012/07/20/pf/expert/market-timing.moneymag/

~Tim~

Thu Nov 28, 2013 4:39 pm

oldguy
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Several years ago there was a 23-year brokerage study on Timing. The clients that bought & held the Index got a 14%/yr return for that 23 year period. The clients that sold when the market dipped and then bought back in when it recovered got an average return of about 2.5%/yr for that same 23 yrs. It turns out that human intuition is almost always wrong. One common phrase was "I'm waiting for the market to recover so that I can get back in". Ie, after the market recovered (presumably to new highs?) the clients got back in - and bought at all time highs - the opposite of buy low, sell high.

Thu Nov 28, 2013 5:00 pm

Julien43
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Cash: $ 0.45

Posts: 2
Joined: 28 Nov 2013

Thanks Folks, Your replies are most appreciated!!! nt

Thu Nov 28, 2013 5:47 pm

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