Why I’m Buying into the Market and My 401(k) Challenge
I’ll start out saying that “buying” means two things in this case:
- I am sticking with my current investment strategy for both my 401(k) and my IRA.
- I have been investing additional amounts from my savings account into the market. Today was the most recent day that I bought.
You might be asking why I am putting part of my savings account into the market when all it seems to be doing in going down. Shouldn’t I be saving all that I can and protecting my downside when the economy is weakening?
I’m investing because I believe that the market is basing most of its movements on panic. When panic sets in the markets decline becomes a vicious cycle. As people pull their savings out of mutual funds, fund managers are forced to sell their positions to fund the redemptions regardless of whether they are bullish or bearish on those positions. This then sends the market down further, which causes more people to pull out which continues the spiral downward. Eventually this will end and people will realize that the market has declined beyond where it rationally should be.
I realize that this isn’t easy to watch day in and day out. In fact, I believe watching it and reading all that the media has to say makes the situation harder to deal with. And I’m not trying to call a market bottom. The market may actually continue to decline (I don’t believe it should, but it might). What I do believe is that we have gotten to the point where the market is based not on rational fundamentals, but rather, fear of the unknown.
I’ll be up front and say that I have more than 20 years until I plan to retire so I have time to push through this downturn. I’ll also mention that I am not advocating that everyone follow a similar strategy, but rather that I think panic has taken over and I think that those who continue to invest through this market will be rewarded over time.
In fact, I’d like to issue a challenge/offer. I will provide anyone who joins me and increases their 401(k) contribution amount by 1% for the next six mos (click here to how much a small change can add up to). with a 15% discount off our annual subscription (or if you are already a client 15% off your next annual payment). In addition, I am not advocating a more aggressive investment strategy. The only requirement is that you invest more and follow your investment strategy. If you’d like help designing an investment strategy feel free to contact our team of advisors at 877-627-8401 or info@smart401k.com.
If you want to take me up on the challenge, post a comment and email me directly at sholsopple@smart401k.com.
Scott H
P.S. I realized that I didn’t mention an end date. The challenge is ongoing, but the discount ends as of 10/25/08.
October 10th, 2008 at 4:34 pm
I accept your challenge. I have been grappling with the idea of increasing my contribution from 15% to 20% anyway. Thanks for pushing me over the edge…
The way I see it, my retirement plan is on sale right now. Being on 36, I have 20-25 years to recoup my “paper losses” of the past couple of weeks. My only hope is that the recovery is slow and steady, affording me more opportunity to take advantage of the current “sidewalk sale”.
Btw, smart401k is an awesome product. Thanks for the great value.
October 11th, 2008 at 6:20 am
I agree that this is the time to be increasing my contributions. As a matter of fact, I increased from 15 to 16% at the same time I was adjusting my investments based on your recommendations. This has been a wild week on Wall Street, but eventually the economy will settle down, and slowly but surely, our funds will come back where they belong.
I also agree that you have a great product. I just received an invitation from my employer to take advantage of a different service. Not only are they much more expensive, but they would have me dropping out of the risk at completely the wrong time. I’m sticking with Smart401K
October 11th, 2008 at 1:51 pm
I agree with you and accept your challenge. I have increased my contribution and look forward to your recommendations.
October 12th, 2008 at 2:43 pm
Starting today, I’m increasing my weekly investment into my 401k by 1%…..
October 12th, 2008 at 2:44 pm
I actually beat Adam to the punch and upped my 401K deduction 1% last week.
October 12th, 2008 at 3:25 pm
I see these rough financial markets as a sale and have upped my 401K contribution by $200 each month. Contrarians win!
October 12th, 2008 at 5:47 pm
I accepted Scott’s challenge as well, but I’ve doubled the challenge and increased my 401k contribution by 2%. Like one of the previous posts, I’m over 20 years out from retirement age and as I see it, its a great time for folks like us to take advantage of a fantastic long term investment opportunity. I’ve also learned that my investment strategy clearly needs to be adjusted as I prepare to exit the market (potentially years ahead of time). I feel sorry for folks who were entering retirement right now who didn’t consider this massive drop as a risk in their strategy.
October 13th, 2008 at 6:48 am
I have accepted the challenge and increased my contribution percentage. I appreciate the recommendation to continue our investments during this turbulent time. Hopefully we are near the bottom now. Being properly positioned for that rebound event is key, unlike those that bailed out of the market during the spiraling downturn. Thanks Smart401k for your thoughtful reassurance and recommendations for us, your clients.
October 14th, 2008 at 7:35 am
Ladies and gentlemen, we have a prime opportunity to utilize the talent of Smart401K and history to better ourselves for the future if we accept the challenge and at the minimum increase by 1 %.I plan to increase now and at the end of the year so I can take the additional pay raise I receive and add it to the initial 1%. All of us who are members of Smart401K, have to feel good about how we are kept in the loop regarding financial matters by them. The constant contact with information written in simple terms is reassuring for novices and experienced alike. I suggest all of you who read this blog to further pass along to all you know ,this site and service so they can have the success we have had and will have in the future…..
October 14th, 2008 at 7:39 am
I too have accepted Scott’s 401k challenge to increase my contributions by 1% over the next 6 months. I have learned quite a bit from the postings on this site, in particular, the ones that constantly hammer home the idea of investing over the long term in a diversified portfolio. I have also learned that it is impossible to time getting in and out of the market, so us as average investors should not even try. If we have reservations about the drop in the market, it’s a time to reevaluate our risk tolerance questionnaire, but not a time to wholesale dump our investments.
October 14th, 2008 at 5:39 pm
I have accepted the challenge and increased my contributions 25% from $400 to $500 every other week.
October 15th, 2008 at 10:48 am
Scott’s offer was too good to turn down and very good advice as well. I increased my 401K investments to the maximum which is $20, 500 limit for over age 55. At this time, I am investing 45% of my earning until the end of the year. Next year, I also plan to invest up to the limit in my 401K. My savings will remain the same, since it is part of my overall strategy. I do not plan to work for 20 more years, so it is important for me to get as much saved as possible before retiring. I have advised all my friends to do the same. Scott was not the only one on the ball. This advice also came from my financial adviser at The Mutual Fund Store. I appreciate the expertise and advise of both Smart401K and The Mutual Fund Store. Thanks, Scott, for all the pep talks, keep them coming. I wish everyone would read these and settle down. By the way, I am also taking a 2 1/2 week vacation to Mexico and enjoying life as usual. We cannot give us so quickly.
October 15th, 2008 at 12:44 pm
I am joining the “smart” investors and increasing my contribution by at least 1% as part of the challenge.
October 15th, 2008 at 3:07 pm
I have increased my contribution amount from 15% to 16% this week.
Thanks for the extra incentive.
Greg L.
P.S. Smart401k provides a great service.
October 15th, 2008 at 6:41 pm
I admit to some “extreme” concern over what happened in the markets last week. I was VERY tempted to bail. The emails I received and also the Smart 401K blog helped me control that panic. I too have about 15 years to retirement and I accept your 401K challenge. I have gone in and upped my contribution by 1% effective today.
October 15th, 2008 at 7:08 pm
Updated my 401K contributions by 2% today for your challenge and hopefully longer.
October 15th, 2008 at 7:18 pm
I accepted the challenge increasing our 401K contribution from 11% to 12%. Thanx for the great incentive as well as the continued commitment of your firm to assist our family in developing and following a successful roadmap to our financial future.
October 15th, 2008 at 7:33 pm
I will increase my 401K by 1%
October 15th, 2008 at 9:02 pm
I accept the challenge and am increasing my contribution by 5%.
October 15th, 2008 at 9:30 pm
I accept your challenge and will increase my contribution from 21.5% to 23%. I think the market is oversold and will rebound strongly in due time. I’m not a believer in market timing and you help to reinforce this approach when needed in times of market decline. Thanks for your advice.
October 15th, 2008 at 10:04 pm
Well, I’m at the maximum allowed contribution to my 401K already and have kept it that way through the insanity of the market. I can’t materially participate in the 1% bump, but I’m with you in spirit and intent.
October 16th, 2008 at 7:22 am
I have accepted your challenge and increased my contribution to my retirement account by 3%. I find your service extremely helpful. I also apply the same principals you provide me for my 403b to my IRA. Heck you should probably charge me an additional 15% rather than giving me a discount. That’s a joke by the way. Great service for a great value. Keep up the good work.
October 16th, 2008 at 9:29 am
I have accepted your challenge and increased my 401K contribution by 1%.
October 16th, 2008 at 9:47 am
I am 68 years old so the picture is alot different for me. I did hold on and did not pull my money out of the more volatile 40lk investments until October 9th…watching the figure go down from $189k to $135k was too much to bear. 75% is now in the money market and the rest in a few mutual funds. However, on Friday morning I did not feel that I did the right thing even though I am 68 years old. I believe what is creating the market volatility is the fact that the entire banking system is unstable.
Having the stock market unstable and the banking system unstable is a scenario that we had not experienced since the great depression.
October 16th, 2008 at 11:30 am
Scott I have increased my contribution from 20% to 21%. I only have about a year to go but believe in what you say. I’ve been very pleased with your advice and hope others will listen to what you have to say. Thanks for all your help.
October 16th, 2008 at 12:01 pm
The 1% Challenge is a great idea. Unfortunately, I can’t take advantage of it because I already invest the maximum in mine. For those of you who don’t, go for it.
October 16th, 2008 at 12:06 pm
I am taking you up on your challenge. I am 46 years old. Buy low, sell high. It is low now, so sems pretty simple to me.
October 16th, 2008 at 12:07 pm
Oh, I forgot to mention I doubled my 401k contributions from 10% to 20%.
October 16th, 2008 at 1:09 pm
Hi Scott,
I will take you up on the 1% challenge. I will be starting a ROTH401K to hedge my bets against future tax liabilities. I currently have 5 years of contributions saved in my traditional 401k. I feel this will be a good datum to watch the growth from the panic stricken decline in today’s markets.
Thanks,
October 16th, 2008 at 1:59 pm
I am taking this challenge and increasing my contribution by 1%.
October 16th, 2008 at 2:03 pm
I’m already maxed out on my 401K but I’m uping my Roth IRA to $6000 - I’m 77, but still figure on a 5 year turn around!
October 16th, 2008 at 2:06 pm
1 percent challenge
Will bump my 401k withholding by 2 points. Buying in now while the buying is good, I hope!
Bob Cox
Arlington, Texas
October 16th, 2008 at 2:37 pm
I accept your challenger and look forward to your future communications.
October 16th, 2008 at 2:51 pm
I’ll be bumping up my 401k from 15% to 16%. Thanks for the motivation!
October 16th, 2008 at 3:18 pm
I am 4-5 years from dipping into my funds…am semi-retired now, and cannot put any more contributions in…..have been real nervous as of late, especially when I have been told by others younger than me that they are bailing out….I have not, have stuck to my allocation, but it’s really hard -let’s hope this is really the rational choice…..I do agree that this should be a bargain time to buy if you had cash on the side, but it’s nice to see many of you are taking the 1% challenge…can only help the markets….and,hopefully,all of us…
October 16th, 2008 at 3:20 pm
Your recommendation makes a lot of sense, I’ll double your challenge and up my contribution by 2%. Being 34 years old now is the time to being buying.
October 16th, 2008 at 4:00 pm
Since joining Smart 401-K I have become much more knowledgeable of how the whole thing works. I, like some of the older guys in this program, contribute the max $20,500.00 per year and I know the shares I buy will come back strong and reward me for my patience. I understand the initial gut feeling to bail and protect but have learned now that my money is still safe and I can’t wait until my next contribution hits the market. All ahead full! Jim 57 yrs old
October 16th, 2008 at 7:45 pm
Increased 401k by 1% and Roth by 1%.
October 16th, 2008 at 8:27 pm
I have taken your challenge and have increased my contribution by 1%.
October 17th, 2008 at 1:48 am
I accept the challenge, I increased my contributions by 1%.
October 17th, 2008 at 7:33 am
Scott,
Thanks for the challenge…I’m on board with a 1% increase in my 401k.
With so much blood in the water, my fellow sharks are gathering for the feeding frenzy. Let the fun begin.
Leo
October 17th, 2008 at 10:06 am
Scott:
I will take you up on the challenge. Your product is exemplary. I especially like the Self Directed Funds choices in addition to the Regular Allocation reccomendations. I will increase 1%.
Thx, Dwayne
October 17th, 2008 at 11:58 am
I accept the challange to increase my 401K contribution by 1%. I have 20 years and this looks like a great time to buy when everthing is “on sale”.
October 17th, 2008 at 12:12 pm
I’m in! Can we buy stock in Joe the Plumber?
October 17th, 2008 at 1:52 pm
I accept the challenge and have increased my 401K contribution by 5%. This will put me at the maximum $15,500 for the year. I know that this will pay off in the future since my time horizen is about 20 years. If the money going in equaled the money coming out stability of the markets should occur. Hopefully the funds I have will have a little more going in than out so that the fund manager may take advantage of the current sale prices on stocks.
October 17th, 2008 at 4:31 pm
I accept the challenge, and have increased my contribution by 1%. I would also like to thank everyone at Smart401k for all the great information and advice over the last few weeks and months!
October 18th, 2008 at 9:37 am
I accept the challenge and have increased my 401k contribution from 15% to 16%. Until this challenge I had not considered going above 15% because I thought that was the maximum. After a little digging I found the limit to be $15,500 not a percent of income. I’m still learning… So my question now is what happens when I surpass the $15,500 limit in a given year?
October 18th, 2008 at 9:42 pm
I have increased my 401k contribution from 12% to 25%. Makes since to me to buy low and I,m not a finanical expert but I would say the market is low. Even if it goes lower, I believe todays market is a good buy. I’m 51 years old and won’t be a seller for at least 9 years. To me the only ones losing money are the ones selling now while the market is low.
October 19th, 2008 at 6:10 am
I gladly accept the challenge - Winners do!
Thanks for the guidance.
JP
October 19th, 2008 at 5:28 pm
I accept the challenge also. I have experienced the bad choice of selling when I should have been buying, in the past, so I’m maxing out my pre-tax limit while the funds are basically “on sale” I hope it’s a short bear market!
October 19th, 2008 at 6:20 pm
I plan on increasing my 401K contribution tomorrow by 1% and would like to take advantage of the advice from smart401k.com
October 20th, 2008 at 5:31 pm
I’ve accepted the challenge and increased my contribution 5%. As Warren Buffet wrote last week, if he’s bullish on US equites then who am I to not follow his wisdoms.
October 22nd, 2008 at 8:33 am
AJS,
Even when you max out on your contributions of $15,500 you still have options available to you. The $15,500 limit only applies towards pre-tax contributions. If you are over the age of 50, an additional $5,000 can be contributed pre-tax as a catch up contribution (resulting in a pre-tax contribution of $20,500). If you max out in either case, you will want to see if your employer allows after tax contributions. The total that can be contributed to a 401k plan in 2008 is $46,000 or 100% of your compensation - whichever is less. This means if after-tax contributions are allowed, you can continue to contribute to your 401(k) and possibly continue to receive the company match. In 2009, the pretax contribution limit will go up an additional $500 and the total 401k contribution limit will be increased by $1,000.
The other option would be for you to contribute to a Traditional IRA or Roth IRA. For 2008, those under 50 can contribute an additional $5,000 in an IRA while those over 50 can contribute $6,000. Both the Traditional IRA and Roth IRA are good platforms to continue putting money aside for retirement.
October 23rd, 2008 at 1:48 am
I have increased mine by 1%. Scary as it is, I think right now is the time to do it!
October 23rd, 2008 at 7:46 pm
I accept your challenge and have increased my 401k contribution by 2%. I have been toying with the idea anyway, so this will give me the incentive to go ahead and do it!