• 02:51:10 am on March 4, 2009 | 8
    Tags: , ,

    201K

    401k Pumpkin by krodinjw.

    Photo credit: krodinjw

    Mark’s experience (50% losses in his 401k; 75% losses in his Roth IRA) prove that it’s not the 401k or the Roth IRA that is the problem, it’s what you put IN them that counts … in Mark’s case, he’s prepared to wait 20 to 30 years to cash them out … presumably, these are ‘backstops’ for him in case his plans to reach his Number don’t pan out?

    As Mark asks: what can we learn from all this?

    _________________________

    As an employee, the 401K program is definitely one of the easiest “savings” vehicle.  It is automatic, you don’t see the money when you get the paycheck and the employer matches too.  However, it is tightly tied to the stock market;  it goes up and down over the years; depending on your investment choices.

    Currently, I’ve 2 retirement accounts, 401K and Roth IRA.  I’ve been contributing to the 401K account for the last 8 years at 10% of my salary. It was bad during the first couple of years where we experience the dot com bust, good to very good the next 5 years and an almost disaster the past 1 year. It is amazing that in 1 year, you go loose so much on paper.

    As of writing, the 401K is valued at $64, 600. It is down probably around 50%, just like the Dow Jones Industrial. It has a good mix of large cap, mid cap, small cap, and international mutual funds. Am I concerned about the return? Yes definitely. Am I underwater? Yes, on paper. But am I breaking sweat about it? Not really.  I don’t need the money now and it still got 20-30 years to recover before I can start withdrawing. Will it recover or produce decent returns by then? Probably. I’ll just continue what I’m doing right now since it is automatic and it is getting an employer’s match at 6% up to $750 per quarter. That is a maximum of $3,000 that I get every year.

    The Roth IRA was a pet project of mine. I enrolled in an advisory service to auto trade calendar options. It was doing well for 2-3 years until the sharp reversal the past year. It is valued only at $4,200 right now, mostly in cash. There are huge losing positions in there. The losses in this account is about 75%.   Lesson learned for sure and I did learn a few things; a rather expensive education for me 🙂

    What can we learn from all this?

     

Comments

  • Josh 8:15 am on March 4, 2009 | #

    Hey Mark, I can definitly relate to hard lessons in the stock market, the good thing is once learned, you can use that experience to either make it back, or subvert a loss in the future.

  • Diane 8:32 am on March 4, 2009 | #

    All good lessons are those that are costly. Mark, you have the right attitude regarding the 401k money coming back up over the next 20-30 years. I hope you are working the individual investments within the 401k as much as you can, however (I suspect you are :)).

    I invested in a couple of things along the way that helped me learn: an IPO in a biogen stock – very interesting. Didn’t make a lot; didn’t lose a lot. I tried the REITs (International) recently and didn’t see a lot happening there. I would think that AFRICA is the place to look now. It has been on the horizon for a while as an emerging market, but continued to be overlooked for others which were more lucrative. I think that part of our historical roots will show a much bigger change and possibly therefore better returns on investments (read higher risks) in that region. Look for big US companies putting dollars investing there; those are the companies to buy into, as long as they are not racking up huge losses with over expansion into other areas doing poorly. South Africa may be the best bet (most familiar to the investing US populace), but there could be hidden areas. I would look for mining and logging type work – exploiting natural resources – as well as infrastructure (construction, transportation, communication) companies. FYI, Australia may be another place to look, as well as other smaller countries which speak English officially (like Ireland) and have exploitable resources or crafts. For Australia, that would be land, for Ireland, Waterford, tourism (small), and such. The desire to invest won’t go away, but the scare will leave folks wanting to invest in something they can understand. Least these are some of my thoughts as to how the money may flow when it starts to flow again….

  • Adrian 2:03 am on March 5, 2009 | #

    @ Diane – Australia is a great market for land (major cities and east-coast ocean) and resources (uranium, gold, iron ore, copper, bauxite, industrial diamonds, etc., etc.). Most of Africa suffers from political stability issues … it will be interesting, to say the least, to see what happens in South Africa after they host the (soccer) World Cup in 2010.

    @ Mark – I am interested in your strategy to reach your Number and your 401k role – if any – in that. Do you see the 401k purely as an ‘insurance policy’ in case you blow your plans? Or, are you trying to give yourself time to ‘recover’ from the losses over the past couple of years?

  • Diane 5:09 pm on March 5, 2009 | #

    Well, just to be cynical – anywhere big business decides they want to make money, doesn’t the military go in there and stabilize it first? Okay, maybe that was a different regime and country.

  • Mark 5:25 pm on March 9, 2009 | #

    @Josh – I knew the lessons and the advice. My main issue is to follow through and implement them – i.e buying puts collars for insurance.

    @Diane – Point taken. Looks like you read a lot about investing in different areas. I’m focusing on some real estate at the moment.

    @Adrian – My 401K and my other retirement accounts are my savings vehicle. Not my investment strategy to reach my number. To reach my number, it has to be in the big 3 – real estate, stocks/options and online business. Looks like I can only focus on one at a time. I’m exploring virtual assistant to help create more time.

  • Adrian 9:07 pm on March 9, 2009 | #

    @ Mark – then see my comments to Jeff about what happens to the size of your 401k/etc. if you divert even some of the current MM101 stream to even some of these MM201 activities:

    http://7m7y.com/2009/03/06/flying-on-auto-pilot/#comment-1703

    … just something to keep in mind when planning your strategy 🙂

  • Retirement Accounts: 7 Case Studies « How to Make 7 Million in 7 Years™ 1:45 am on March 11, 2009 | #

    […] Mark – The title of his post is 201k in reference to the beating that the stock market has given it recently, but Mark has a long-term view; it seems to me that he hopes to reach a large Number through investments, etc. and leave his retirement accounts simmering along nicely … if the meat’n’potatoes of his Wealth Strategy don’t pan out, then perhaps he’ll have a nice hot financial stew waiting for him when he reaches 60? […]

  • MM101 Summary « 12:07 am on April 27, 2009 | #

    […] been looking at our MM101 activities ranging from our housing, to our choice of transportation, retirement accounts, debts, income statements and net worth statements. These MM101 building blocks are definitely […]


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