If you follow my blog, you’ll know in July my ROR on my 401k was 0.4%. It sucked. Well, in August I decided it was time to reallocate my retirement funds completely. At this time, my 401k had already recovered to a ROR of 1.9%. I went from:
20% – Money Market
45% – Bonds (Stable Value 20%, Total Bond Market 5%, TIPS 20%)
20% – Total Stock Market Index
10% – Total International Stock Market Index
To:
100% – Aggressive Fund
What’s aggressive mean? Read this comment…I’ve decided to forgoe a new type of 401k that came about, although it is a still a consideration. I’ve been thinking about asset reallocation for sometime…I just never did it. In fact in May, I was going to do it! But never went ahead with it…mainly because I wasn’t comfortable with market conditions.
My current ROR? 5.3%. Not a bad turn around in a few months. Have you checked your returns recently?
BTW, I am considering re-shifting my 401k yet again soon…I’m not so sure the market is headed in the right direction in 4Q06 and 1H07. I do believe the recent upticks aren’t well supported and a correction is ahead.
Chuck
September 27, 2006 at 2:59 pm
One of the unfortunate things about T Rowe Price is they only update the YTD earning on their site once a quarter… which is 3 days away so the YTD displayed is from almost 3 months ago. Right now it displays 3.42% but it will be higher at the next update. I suppose I could keep track of it myself but I have not been that motivated.
James
September 27, 2006 at 8:33 pm
Good call. The dow is at all time highs, you should be making way more than 4 percent.
freedumb
September 29, 2006 at 8:52 am
Chuck,
Wow, once a quarter? That would bother me…do they allow reallocation? I’m not sure how many options you have in your 401k, but if I didn’t know how it was doing, I’d complain…a little.
James,
I’m curious, what kind of returns would you say is good right now? I’m wondering if my returns are lower than others…
Enough Wealth
September 29, 2006 at 11:12 pm
I think you need to decide what your risk tolerance is, your timeframe (20+ years?), ad the required long-term return to achieve your goals, and proceed to determine the optimum asset-allocation (close to the efficient frontier) that is likely to provide the required return at the least possible risk.
Or, if you don’t have a particular goal in mind (eg. retire with $1m in retirement accounts in 25 years), then your goal can be to achieve the maximum likely return for your chosen level of risk (return variability).
I really think that trying to time the market and dynamically alter you investment mix quarter by quarter will eventually land you in trouble.
Regards
http://enoughwealth.blogspot.com
freedumb
September 30, 2006 at 6:53 am
Enough Wealth, I have to think about it more seriously…So far, I just know I want to save as much as I can for retirement, but how much I’ll really want to have to spend annually, I don’t.
I’ll write up a post later to detail my retirement plans later. Thank you!
freedumb
September 30, 2006 at 6:54 am
BTW, I agree about the timing thing…I think I enjoy it because it’s like a game…but my retirement funds shouldn’t be thought of as one…so I’ll have to change my attitude.
mapgirl
October 4, 2006 at 11:18 am
Freedumb,
I’m a little concerned here. Never try to time the market. After all, it’s when your ROR or ROI sucks that you buy more and let things average-dollar-cost out. (or is it dollar-cost-average out?)
I agree with Enough Wealth, you’re playing a risky game, but if you have the stomach for it, I’m not sure I can give you anything but Nervous Nellie arguments against it. There’s nothing that says you can’t. It’s just that conventional wisdom holds that one is more prudent with retirement assets and does not go with 100% stocks in the portfolio unless you’re very young. (How old are you again? hm. It says ‘almost 30′. I’d say you’re approaching a point where 100% stocks is probably a bad idea. For myself, I’m an aggressive investor, but even so, I’m only about 95% in stocks, the rest are bonds.)
Market Timing With My 401k…Why I Do It. « Financial Freedumb and Brownie
June 10, 2011 at 9:33 am
[...] received some great feedback from Enough Wealth telling me that in the long run trying to time the market may get me in trouble. I agree. For the most part I don’t do it, but my 401k is setup such that I can reallocate so [...]