Starting 401k near the highs in a bull market?

[MKTrader]

Thank you for this. Makes me second guess investing into my company's 401k plan .

Let's say I was starting to contribute 401k at the top of 2007 or 2000 or Oct 1987.....it wouldn't be smart unless I had seen we were gonna take out the peaks of the top in the following years.

Let's say I started contributing to my 401k in Japan at the peak in 1990.... I still wouldn't have recovered after 30+ years correct?

Also hindsight it would be better to start 401k at the low of the market vs the current levels correct?

None of the U.S. examples would've been a big deal. You're gradually investing, not adding a huge lump sum at once. In fact, the top of 2007 would be good, because you'd continue to invest during the 2008 crash then recover everything else plus a lot more in a few years.

Japan has been a different beast. We haven't seen anything like that in the U.S. since the Great Depression. Technically, it took 25 years or so to recover from the Depression, but dividends were higher then, so if you reinvested dividends, you recovered a good bit faster.
https://investment-fiduciary.com/20...our-retirment-in-a-recession-even-depression/

But again, in a 401k, you'd be investing as the market dropped 40, 50 and up to almost 90%, then getting the gains on the way back up. They weren't around in the Depression, though.

 

[MKTrader]

instead of worrying about market tops/bottoms.... at this age priority number one is get your earning power up... way up!

making 50k? figure out how to make 100k.
100k? figure out how to make 200k

and so on.

that is by far the game changer, instead of wasting effort to time the market.

Yeah, a lesson I wish I learned when I was younger...

 

[MKTrader]

I would not be surprised if you said for a 65 year old. But for a 28 year old??? Damn, what's with this hostility about NOT FOMOing in at the top?

Smart money index is back at 1990 levels on BT (i.e., in cash, bonds). Are you seriously telling this fellow to do what all the dumb money are doing which is to pull up a 10 year chart on the SPX, extrapolate it, and maybe buy calls into a panic rally? Come on!

Someone else doesn't understand a 401K. If the market crashes 40, 50 or 60%, he continues to invest, and has a pretty low average price per share.

 

[sle]

instead of worrying about market tops/bottoms.... at this age priority number one is get your earning power up... way up!

He should do both. In fact, an early start on retirement savings is probably worth more than a salary bump.

 

[tiddlywinks]

Are you sure about that? I kept several 401k from my previous employers and only recently rolled them all into an IRA. I paid no additional fees beyond the management fee for the fund.

Each company 401k is (likely)different... I'll admit the word MUST in my response was inaccurate, if you enjoy the headaches of multiple accounts each with the same purpose. And for some companies, the rollover out may have it's own set of fees and rules. Of course, nowadays, all these things MUST be disclosed.

Last I checked, the S&P 500 vehicle in my 401k had equal fees to SPYs. Tax advantage is very important in many ways (e.g. if you rebalance between assets, you don't want the tax scrape).

OK. Each is different. Generally, investment options in 401k's are limited. And in many cases, management fees are above average. The company match is the big deal with a 401K. Other features such as investment choices and fees in many cases can be bettered and the tax advantage can be replicated though self-directed vehicles.

 

[sle]

Smart money index is back at 1990 levels on BT (i.e., in cash, bonds).

Smart money has a much shorter time horizon. From his perspective, adding a few hundred dollars to the market every month and holding for 30 years, the entry price does not make that big of a difference.

I would not be surprised if you said for a 65 year old. But for a 28 year old??? Damn, what's with this hostility about NOT FOMOing in at the top?

They are spot on. A 28 year old has plenty of time to compound out of pretty much any crash and still be ok for retirement. A guy who might retire next month has very different risk preferences.

 

[Woodrow97]

Smart money has a much shorter time horizon. From his perspective, adding a few hundred dollars to the market every month and holding for 30 years, the entry price does not make that big of a difference.


They are spot on. A 28 year old has plenty of time to compound out of pretty much any crash and still be ok for retirement. A guy who might retire next month has very different risk preferences.

These are fair points. All I'm saying is if the fellow here feels uncomfortable buying into this 10+ year rally, there are other alternatives. Heck, buying bonds is probably less nerve recking than waking up at 2 am everyday to check how the ES is trading relative to Asia / Europe and how it's gonna affect one's SPY holdings .

 

[lindq]

So company offers 401k option...
Obviously it would be smart to start deferring some money into it, however few concerns I have are that
We are near the highs in a bull markets that's been running for 10+ years and also the fact that it's long only funds....

My question is, do I wait till we get a crash in the markets or go into bond funds until we get a supposed correction few years down the line?

Trying to time the market is a very bad habit to get into. You will regret it 30 years from now.

 

[SimpleMeLike]

So company offers 401k option...
Obviously it would be smart to start deferring some money into it, however few concerns I have are that
We are near the highs in a bull markets that's been running for 10+ years and also the fact that it's long only funds....

My question is, do I wait till we get a crash in the markets or go into bond funds until we get a supposed correction few years down the line?

heavenskrow,

I invest in my company 401k as well. Please start investing as well for the free cash and long term wealth. It does not matter if you start buying near the lows are high. Just start and consistently do it. I started in 2008 and never looked back. Never even think about it.

 

[SimpleMeLike]

So company offers 401k option...
Obviously it would be smart to start deferring some money into it, however few concerns I have are that
We are near the highs in a bull markets that's been running for 10+ years and also the fact that it's long only funds....

My question is, do I wait till we get a crash in the markets or go into bond funds until we get a supposed correction few years down the line?

You better get started buddy and quit goofing off. Play with this and forget this buying at top stuff and just get start. https://www.portfoliovisualizer.com/backtest-asset-class-allocation

Women lie, Men lie, but the motherfucking numbers don't lie. I am long and strong 100% total stock market in my 401k.