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Hey Macho (wo)Man - You Might Want to Reconsider Having Your 401K Allocated to Cash...

Here's some advice that will have you giving the "bird" to your computer screen when the past year hasRecoveries-283x300 witnessed your 401k value chopped by 40%...

"Buy Low, Sell High". 

Giving the screen the "we're number one" salute yet?  It's a cliche', but it's true.  It's human nature to avoid things that are painful, especially shortly after you have experienced the pain - things like being invested in stocks when the market took the elevator down from 14,000 to 8,000 in one year.

I'm not an investment advisor, but take a look at the chart to the right (hat tip to Brett Billock).  It outlines the worst U.S. market declines in history, then illustrates how much the market recovers in 1, 3 and 5 years respectively.

Average rebound of the market one year after the end of a recession?  55.6%.

I know, I know.  The fundamentals are REALLY screwed up this time, and this time is different.  I hear you...

I wonder if they thought the same thing back in 1930?  You know the time, when they were taking the pictures of the dudes in suits standing in front of the soup kitchens?

Repeat - I'm not an investment advisor, and times sure suck.  Still, this chart would seem to be prime fodder for investors everywhere, including 401k participants. 

Buy Low!!


Ann Bares

A nice bit of perspective, something that seems to be in short supply lately - thanks for highlighting it here.

Brent Billock

Thanks for the shout-out, and for spreading the word to your readers. We all really need to hang in there. The market will be back much sooner than the overall economy is.

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