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grokfinance t1_iy4aibw wrote

You are putting your money there because over time (10-20-30 years) the stock market has historically returned more than any other asset class. So yes, the market is down ~20% this year. A lot of technology stocks are down 60-70-80% this year. It happens. If you are in your 20s, 30s, 40s who cares? You should actually want the stock market to drop so your money buys more shares and over the long term (decades) more shares = more gains.

Retirement accounts have tax benefits like allowing your money to grow tax free. And if you are using Roth 401k or Roth IRA then not only does your money grow tax free but it is also tax free when you take it out in retirement. That is a big benefit.

So as long as you aren't a few years away from retirement and you are invested in a good diversified mix (hopefully a total stock market index fund or an S&P 500 fund or a target date fund) with low expense ratio then just stay the course.

PS - I would contribute to 401k up to the point of the max company match and then switch to maxing out a Roth IRA. Invest the Roth IRA in a total stock market index fund like VTI.

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Lobster_osity OP t1_iy4bufb wrote

OK, I am getting that I am being too short sighted. A little unnerving putting that much money into such a long term investment, but that's what saving for retirement is I guess!

The 401K is a diversified portfolio. I went through the options with the broker and picked one with investment objective-- moderate growth. Has a mix of cash alternatives, fixed income and equities.

I will look into the roth IRA thing.

Thank you!

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grokfinance t1_iy4c2wv wrote

FYI - you didn't say your age but unless you are in your mid to late 50s your "moderate growth" portfolio is likely way too conservative. In your 20s/30s/40s there really isn't any reason not to be 100% stocks. Certainly no cash. Cash would just be sitting there earning probably less than 0.05%. Why? You might feel more comfortable with a more conservative approach, but just realize being too conservative is actually a category of risk onto itself. You need the money growing and compounding to keep pace with inflation.

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Lobster_osity OP t1_iy4ch6y wrote

Wow, I didn't think about it like that.

I am early 30's.

Maybe I'll talk to my broker about transitioning to a more aggressive approach.

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grokfinance t1_iy4d2ta wrote

Yeah, early 30s I'd be 100% stocks. I'm skeptical of what this "broker" is doing for you. Likely he/she is just adding fees that you don't need to be paying. Literally all you need to do is select a target date fund that your 401k plan offers or better would be a total stock market index fund. If you don't have either of those two options then an S&P 500 fund. If you are paying any kind of extra fee to this broker then I'd axe that ASAP. Fees, like growth, compound and add up over time. Paying an extra 1% fee over 30 or 40 years will eat up something like 30-40% of your gains over time.

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Lobster_osity OP t1_iy4envn wrote

Honestly I think he was just hearing and responding to my hesitancy to be aggressive when I first set it up. When I started I wasn't sure how my commissions would go and my emergency savings were slight-- I was afraid I might need to pull out at some point and with market trending downward, my instruction to him was to keep alot of it in cash.

In hindsight, my commissions have been better than expected and I built up my emergency fund and I don't expect any type of early withdrawal even if I lost my job today.

Hey, maybe it's a blessing in disguise-- I can use that cash to purchase more stocks than I could have at the beginning of this year!

Trying to look into the fee schedule right now. This is where my online account sends me when I click fees: https://saf.wellsfargoadvisors.com/emx/dctm/Marketing/Marketing_Materials/Image/e6748.pdf

I have a feeling my employer would be wise enough to not have a crappy one-- it's a small business and the owners are personally invested in the 401(k) as well.

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