Protect Your 401K

Checked your 401K lately? Going back to about a year ago many of these retirement accounts have shrunk by 30%, some even more. What Happened?

You have been putting money in for years and your employer may have been contributing to your plan also. It is not supposed to get smaller. You are planning to spend that money some time in the future when you decide to quit working. Along with your Social Security payments you should be able to maintain your current lifestyle. But not if your 401K and IRA keep going down and down.

The is no shortage of bad news when mutual funds such as Fidelity Magellan is off more than 30% and Janus 20 is down 63% and I could go on and on. Now you have a sharp pain in your stomach when you read your statement and when you call your broker he gives you the old song and dance about being in there "for the long haul, don't sell". It is not his money.

If you have your 401K with your employer who has a "professional manager" please don't blame the boss. He is at the mercy of that "professional" too who is slowly having you all go broke. These money manglers are taught the three great myths of Wall Street - Do Research, Buy and Hold, Dollar Cost Average. These doctrines have been promoted for so many years that they have become conventional wisdom. You don't need anyone to tell you they do not work. All you have to do is examine the results.

Buy and Hold is the greatest killer of profits. I know. Almost every broker will never tell you to sell when your stock or mutual funds starts declining yet every professional trader will have that as his first rule: have an exit strategy when your investment starts to either lose money or take away profits you have made. If you had been an owner of Janus 20 when it went from 40 to 94 and had a planned exit strategy you would have sold out near 80 to protect your profit. Now it is trading about 35 and after 2 years you have a loss instead of doubling (and keeping) your money.

How can you protect yourself against this type of loss? Don't rely on your broker or financial planner. They have too many clients to be able to watch your money. I said your money. You are the only one who cares. And if you don't want to take an interest in protecting it then you will be eating dog food instead of steak at age 65.

As the mutual funds go up in your 401K or IRA you must take a few minutes once each week or at least once each month to check the price. As you saw the $40 fund advance you set a mental stop-loss value of from 7% to 15% and when it goes down to that price you must immediately transfer those funds either to a different fund that is still advancing or to a Money Market account. It is that simple and there is nothing complicated about it.

If you don't protect your retirement account no one else will. Start today.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

---

Investment Clubs

Because you don't feel too sure about which stock or... Read More

Overvalued & Underbought

With all the bad news that has been dumped upon... Read More

Political Investing

We have two candidates for president that have really different... Read More

How to Read an Annual Report

Every publicly traded company is required by the SEC(Securities and... Read More

Stealth Bull

If you have been watching the stock market at all... Read More

Forces that Move Stock Prices

Among the largest forces that affect stock prices are inflation,... Read More

Size Counts!

What the heck am I talking about?It is often said... Read More

Maximizing a Stock Market Investment

Maximizing a stock market investmentThere are several factors an investor... Read More

Inverted Interest Rates

Inverted interest rates? What's that? Who cares? Even if you... Read More

Struggling Stocks, Booming Commodities

04/28/2005NASDAQ dropped -12.5% year to date in 2005. S&P500 index... Read More

Exchange Traded Funds Primer

Exchange Traded Funds (ETFs) are a group of passive index... Read More

Discipline

One of the great "secrets" of successful people is discipline... Read More

Bollinger Bands Strategies

The Bollinger Band theory is designed to depict the volatility... Read More

Stocks & Oil, Sat Jun 18th, 2005

Both the stock market and oil prices rallied recently, which... Read More

Diversification

Wall Street's watchword has always been diversification, but what does... Read More

Investment Research - The Dalbar Study

Very few people, even professionals, have heard of the Dalbar... Read More

Keep Your Profits

It looks like we have now entered a new bull... Read More

Smart Day Trading Strategies to Help You Make Money in the Stock Market

Stock trading can be a very profitable activity. You can... Read More

Understanding a Stocks PEG Ratio

A PEG ratio cannot be used alone but is a... Read More

The Bottom?

Every day I hear someone on CNBC proclaim that "this... Read More

Market Experience of a Naïve Stock Operator

Sometime in the third quarter of 1997, someone told me... Read More

Its A Bull, Its A Bear, Its Suptertrader!

The higher the market goes the more confusing are the... Read More

Evaluation I

An insane person cannot evaluate an insane evaluation system.As you... Read More

Robert Rodriguez Weathers the Stock Market

Robert Rodriguez likes to buy stocks at their lows. When... Read More

The Elephant

Four blind men were asked to give a description of... Read More

Learn to Calculate a Stock?s Pivot Point

Stocks breakout from properly formed bases everyday but many investors... Read More

Why Is The Macedonian Stock Exchange Unsuccessful?

The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More

Stock Trading - Daddy, Why Arent We Rich?

One Saturday morning, while he was sitting at his computer... Read More

Red, Green, Yellow - or - Stop, Go, Go Very Fast: Which Describes Your Online Trading?

Ever notice how behavior in one area of life can... Read More

How to Make Big Money Safely in Stock Market

(1) Stock Market is Tough Place to Make Any Money... Read More

Stock Market Investing: Knowing When (and when not) to Sell

One of the greatest challenges of investing in stocks is... Read More

The Skinny on Mutual Fund Investing

Mutual fund investing is a lot like Thai cooking. Everyone... Read More

Selection Vs Direction

As I have said many times before in this column... Read More