401(k) moves when stocks hit highs

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When is the best time to plan for a stock sell-off?  When the indices are hitting new highs, of course.

Rarely do investors consider defensive moves in their 401(k)s when stocks are  rallying, but that is precisely when you should begin thinking about diversifying your investments. 

When stocks get squirrely, I recall a comment from my old colleague, Noel, who used to declare: ‘Well, it’s either the warning bell or the dinner bell.’ More often than not, as we have discussed in previous columns, it is the dinner bell.  

From the time I began investing in 1987 through last year, stocks, as measured by the Dow Jones industrial average, have generated positive returns in 27 of 33 years, or 82% of the annual periods over that time span. This stretch includes Black Monday in 1987 when I began my career, the 2000-2002 market slide and the bear market in 2008 through March of 2009.

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All of that proves that stock sell-offs usually provide a golden opportunity to heap more holdings onto your plate at lower prices. By the way, the cumulative total return from January 1, 1987, through the end of last year was 3,415%.

An event like Black Monday, my friends, was an epic dinner bell.

Buy low, sells high with your 401(k) 

If you, like me, believe stocks are still in a long-term bull market then meaningful downturns (think Q4 2018) provide a happy opportunity to look at our 401(k) contributions and allocations with new eyes. The hardest part of investing is to be a buyer of stocks in a falling market and a seller in a rising one. It just feels wrong. But it works.   


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By Bernice Caldwell

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