Skip to comments.Vanity: Should I move funds in my 401(k) before the election?
Posted on 11/05/2012 9:19:41 AM PST by chrisser
So I have a modest nest egg in my 401(k).
It's in growth stocks, and I've had almost 13% rate of return this year. I've pretty much made up all I lost in the last big crash.
I'm concerned that if Obama is reelected, or if the election is undecided for weeks or months, that the market may tank. If the former, the downturn would likely be somewhat permanent.
I can transfer funds between investment types with no fees and do it online. If I did it today, I believe the funds would be transferred by tomorrow.
Was thinking of moving my money into a money market fund for a few days, just to ride out the election. I'd rather preserve it and miss a Romney market upturn than loose it.
I don't normally consider changing my allocations trying to play the market, but I have a sense of foreboding about the election. Living in blue-ville, I know what shenanigans the 'rats are capable of. I'd like to be optimistic about R&R pulling it off, but I'd also like to not loose a bunch of money as I have in the past.
So I'm on the fence about pulling the trigger. It seems like a pretty safe move to make with limited downside.
I know there are a lot of savvy investors here, and I'm curious what your take on my idea is.
As long as your portfolio is diversified, you’ve got nothing to worry about. I’m heavily leveraged in stocks, as I’m still in my 30s, and my Roth AND investment accounts have seen major gains this year. My 401(k) declined 41% over the last 6 years.
If you’re diversified across multiple sectors, you’re not going to lose your shirt. Remember, the market has historically gone up regardless of president or world events, even during the Depression.
You can lose everything you have in one day if the market collapses. Buy physical silver and gold. They’re both at a great price right now.
He's asking about his 401k plan which doesn't allow for such purchases.
The 401k system allows for the purchase of gold and silver and I'm not talking about the ETF's. The funds can be used to purchase physical gold and silver that is segregated and placed in a safety deposit box.
If it's managed by your company these options may not be available.
I find it improbable that a 401K plan allows you to have physical gold for the reason that the government would not know if you had sold that asset and didn’t pay a penalty. These tax structured plans call for paper trails and paper transactions and physical gold in your safety box doesn’t allow them their intrusion fun.
Two words of advice, the first being “do not panic”. Because if you do, you will invariably lose money.
But that being said, assuming a big Republican win, assume also that some very bad things will happen less because of the lame duck congress, than the “bureaucracy gone wild” and executive orders.
While this will begin shortly after the election, the real trauma will be in the first half of January, with a “multiple witching hour” of very bad things happening all at once.
The Bush tax cuts run out and Sequestration goes into effect. These two alone as has been said by former Federal Reserve vice chairman Alan Blinder, could cause a contraction in the GDP by 3.5%
The current ceiling of $16.4 trillion was supposed to take us into 2013, but that will more than likely not take place. But unlike before, when the Democrats forced the Republicans to extend the ceiling, this time they will refuse, forcing a “government shutdown”, which they, and the MSM will blame on the Republicans.
This will mean a cut off of a lot of government largess all at once, including Social Security and unemployment checks, all welfare and food stamps, and who knows what all else.
Add to that mischief from the bureaucracy and executive orders, solely intended to monkey wrench the economy.
HOWEVER, as with the usual disclaimer, future events may not be determined by past behavior.
So the best advice that can be offered right now is to be alert, don’t act, but be very prepared to act if necessary.
Perhaps, but you should dig a little deeper.
When I left my a job several years ago, I rolled everything over to my financial adviser. At first I placed a large part into gold and silver ETF's. After hearing about some end of year accounting tricks; transferring metal in for end of year financial statements and then moving it out just as quick. I decided to move the funds to physical metal. Programs exist that allow pre-tax retirement funds to purchase metal and store it in safety deposit boxes. I can not sell any of it outside the 401k usage rules.
P.S. You CAN buy gold and silver with your IRA, it's called a Precious Metals IRA.. You don't possess the metals but the custodian 'keeps it for you' in a vault. Somewhat risky but you CAN 'buy' PM's with your IRA.
If you believe Mitt will win and you’re not super cautious or super aggressive, leave them.
If you believe Obama will win and there will be turmoil (riots etc.,) get partially out of stocks and into cash, open a brokerage account if you don’t have one and invest the money in Pro-shares Ultragold preferably tomorrow - UG is a double long ETF on gold. Do NOT LEAVE you’re money in cash if Obama wins.
If you want to hedge - to just protect without taking advantage of market distortions- move some % into a short term money market fund. The risk is you will miss out on a Romney bounce, but you can pick it up next week after the enthusiasm settles.
Stocks in general will strengthen slowly but surely during lame duck times after an initial Mitt Bounce has settled. The reason is that there is currently over 1.5 trillion in capital in private industry sitting on the sidelines ... companies want to but are unwilling to invest it, because they can’t determine ROI until they know the future regulatory/tax environment. A Mitt win means they will begin investing forthwith.
If Obama wins, some will be invested simply because they can now do their some version of projection and financial analysis ... but O is still a dark cloud over business. An O election means business investment is unwise, except for those businesses in the administrations pocket.
Summary: If you’re super careful, pull 2/3 out into cash or something and re-invest when the dust settles. If you’re super aggressive, pull 2/3 out into cash, and be ready to invest half of that in double long positions on gold. If you’re neither super-this nor super-that ... but you’re concerned, hedge a bit by trimming your stocks into cash for the short term (month or so.)
Finally - if you’re super smart, liquidate your entire IRA, suck up the 10% penalty plus taxes, wire it all to Intrade, invest 1/4 in R winning the Pres, 1/4 in R winning 290 EV, 1/4 in R winning over 300 EV, and 1/4 in Chris Matthews not coming down for breakfast Wednesday morning.
I would have NOTHING in bond funds , I see increasing interest rates (and high inflation) in the near future no matter who wins ... maybe you can be short bonds...
CASH is good , but not great ,, stocks will do well in high inflation but probably will not outperform inflation if it REALLY heats up... Companies with TONS of debt are real good if they have decent cash flow as inflation will kill the value of their debt in a buyback/payoff and their pricing in the market right now is probably rock bottom ... conversely companies that loan money will suck (banks , GE ,, etc.) .
If you think hyperinflation is coming buy gold/silver (physical only)...
Preservation of buying power will have you in a great position in a few years...
Thanks to everyone for the advice.
I didn’t do anything, but at least that was a decision rather than the lack of one.
Would have posted earlier, but I could barely get into FR to read the thread and posting was impossible for most of yesterday for me.
I hope everyone has a safe Election Day.