Would you take some chips off the table?

[XingEyeballs]

I’m 36 and have a well funded 401k through work that I’ve been contributing to since I was 20. It’s managed through an advisory group that runs the plan and has typically performed well year to year. As I still have many years of work it is invested at a higher risk threshold and almost all of it is in play. I know it’s BBC but interested in opinions…
I personally think we have a financial crisis coming. Our personal finances are safe and we’re secure, just considering pulling back our 401k investment options into low risk (lower performance) options and take some risk off the table for a few years. Still plan to fund it to the fullest of our ability just take some chips off the table maybe…
Thoughts?
Just hate to loose what we’ve built through such hard work and I’m not nearly educated enough on the stock market to “make money on the crash”.
No politics please, just personal insights

[boneil]

If you're not educated enough on the market to make money on the crash then what makes you think you are educated enough to anticipate a financial crisis? The saying goes, "more money is lost timing the market than just leaving money in the market"

Another question, why do you think you would be able to time the market to get back into higher risk holdings? During a financial crisis, the time to go all in on risk would be at the moment when the economy is in dire straits, when things are breaking, at the scariest moments possible. Do you think you have the stomach for that or the knowledge of when that is?

There's nothing wrong with moving things around as you evaluate your risk tolerance. It's a good thing to do. But don't do it because you think you can time the market. Billionaires with decades of market experience can't time the market.

That said.......................... if you have a 401K that you have been funding for nearly 20 years, GOOD JOB, I wish I was that smart at 20. If we're talking about alot of money (don't need to know amount, alot is different for everybody) you need to understand what it is your holding. Don't just trust an advisory group. story time:

I worked as a subcontractor at some powerplants. I had alot of friends who were employees of the powerplants. I know people that worked there most of their adult lives and most of them contributed to the companies 401k that was managed by an advisory board. I'm not sure all the details about the situation and your situation is probably different. But, There were people who was on the verge of retirement with 100's of thousands even millions in these accounts. Things were great, but sometime during the financial crisis, they lost nearly everything. Most of the employees had no idea what it was they were holding. Alot of them had company stock that turned nearly worthless overnight. The company had exposure to high risk assets and the company went bankrupt and was sold to another company. There was nothing the workers could do. They put their trust into an advisory board and got burned.

So understand what it is your holding, understand what it is you would be moving money into, and then evaluate. Don't just trust an advisory group, talk to them. You have alot of time left before retirement, say 25 years, you will probably experience atleast 1 if not 2 financial crises. I'm 42, 110% fully invested in high growth and I will stay that way in high growth/risk till I'm atleast 55.

[Tfall]

Back in 2008 when the market crashed many of my coworkers panicked and pulled investments, stopped adding to their 401ks, or did what you mentioned and put in low growth funds. I did the exact opposite…I maxed out my 401k during that time and invested big time…stocks were on sale! Fast forward to know…I am retiring at 55 at the end of next year because of what I did back then. Now that I’m close to retirement, I moved most of my money to less risky investments. I always keep cash on the side for fire sales too. There will be a market correction and maybe a downturn in the next few years but you will have plenty of time due to your age. So when the market tanks don’t run away…run in!

[XingEyeballs]

If you're not educated enough on the market to make money on the crash then what makes you think you are educated enough to anticipate a financial crisis? The saying goes, "more money is lost timing the market than just leaving money in the market"

Another question, why do you think you would be able to time the market to get back into higher risk holdings? During a financial crisis, the time to go all in on risk would be at the moment when the economy is in dire straits, when things are breaking, at the scariest moments possible. Do you think you have the stomach for that or the knowledge of when that is?

There's nothing wrong with moving things around as you evaluate your risk tolerance. It's a good thing to do. But don't do it because you think you can time the market. Billionaires with decades of market experience can't time the market.

That said.......................... if you have a 401K that you have been funding for nearly 20 years, GOOD JOB, I wish I was that smart at 20. If we're talking about alot of money (don't need to know amount, alot is different for everybody) you need to understand what it is your holding. Don't just trust an advisory group. story time:

I worked as a subcontractor at some powerplants. I had alot of friends who were employees of the powerplants. I know people that worked there most of their adult lives and most of them contributed to the companies 401k that was managed by an advisory board. I'm not sure all the details about the situation and your situation is probably different. But, There were people who was on the verge of retirement with 100's of thousands even millions in these accounts. Things were great, but sometime during the financial crisis, they lost nearly everything. Most of the employees had no idea what it was they were holding. Alot of them had company stock that turned nearly worthless overnight. The company had exposure to high risk assets and the company went bankrupt and was sold to another company. There was nothing the workers could do. They put their trust into an advisory board and got burned.

So understand what it is your holding, understand what it is you would be moving money into, and then evaluate. Don't just trust an advisory group, talk to them. You have alot of time left before retirement, say 25 years, you will probably experience atleast 1 if not 2 financial crises. I'm 42, 110% fully invested in high growth and I will stay that way in high growth/risk till I'm atleast 55.

I appreciate the well thought out response. To be clear, I have zero intent to predict the market and “time” the fall much less bottom for maximum earnings. What I do see is many industries I work in and around starting to do things that don’t seem sustainable and I have every reason to believe that the employees that work for them are no less overextended in their private finance than they were in 2008 if they do loose their jobs. So although I’m not sure I understand all the moving parts, I feel I see a train heading off the tracks and I just don’t want to ride it if it’s not smart. (It may be 3-5yrs but I feel it has to correct)
I appreciate the heads up on the advisory group, it’s the single most frustrating thing to me about investment and retirement, finding someone you can trust and actually knows what they’re doing.
Thanks again for your input, your saying is very accurate!

[NitroZ7]

Nothing wrong with taking some gains, especially since it is in a 401k, and rebalancing it into more moderate investments. Most fund managers re-balance at least once during the year. I have been rebalancing in my account because some investments over the years grew and became a larger portion of the account than I wanted. If being in all aggressive funds is causing some stress then maybe decide on a portion to move into something moderate. Then if the aggressive part falls you can always dollar cost average in through your 401k. At 36 you still have the benefit of time.

[GregA]

Multiple great advice above. And agree, wish I had started when you did. To reiterate, it's about being IN the market, not timing the market. Compound loses hurt, so perhaps manage your exposure. Most amateur investors do not understand the math.

At 36, I would stay the course and ride the highs and lows. A financial crises is NOT coming. Today's market is nothing like it was 20, 10, or ever 5 years ago.