Did you know I LOVE LOVE LOVE getting emails from PDITF readers!? It’s nice to break up the spammy sponsored blog post proposals that typically flood my inbox. “Dear Ninja, I would like contribute relevant financial information to blog readers of your fine website”.
Emails like that make me want to stab my eyeballs out with a jalapeno.
That’s why I was pleasantly surprised to get this email from a reader….
I have a question about buying low and selling high. Does this apply to retirement accounts as well?
I have nearly 40k in my 401k, nearly all a ROTH. I put in 12% of my income in and my employer matches 4%. Given that the markets are what I would consider “high,” does it not make sense to sell now and move my accounts to cash?
I tried doing this through my Fidelity account, but did not have a cash option, everything was in funds or bonds of some sort. When I contacted a representative on how to do this I was asked why am I doing this, that this is not the point of a 401k, and that it would benefit me to stay in the market, for the long term.
Ahhh, pretty simple question “Should I buy low and sell high?”
The answer is even more simple…. YES!!!!!
Only problem is, no one knows what “high” or “low” means. People were freaking out when the Dow dropped under 10,000. They thought 9,000 was an insane deal and it was time to buy. Little did they know, the markets would shed another 25%.
I think your Fidelity rep is spot on. Maybe the markets hit 16,000 next month, or maybe they drop to 13,000. Since I have no way of knowing what’s going to happen I just invest consistently every month. That means I bought in when the market was in the 6’s and I’m buying now in the 15’s.
Don’t get me wrong. I know the markets have been extremely bullish the last couple years. A correction will surely come. But is that correction going to be from 20,000 back to 17,000? Or will it be from 15,000 down to 12,000? Will it be six months from now, or six years?
I CAN accurately predict the market will go up and down, but I CAN’T get any more specific than that.
And for that reason, I’ll stick to boring old unemotional dollar cost averaging in my retirement accounts.