Federal Reserve data indicate that between January and early May, bank savings deposits rose by almost $170 billion. At the current rate, new deposits for 2009 will exceed those in 2008, which totaled almost $330 billion.
Clearly, you’re voting with your money. While many of you have stayed invested, others have either withdrawn from the market or stopped committing new investment to the market—and, in some circumstances, both.
Has your 401(k) become a 201(k)? That’s a pretty common joke these days, as financial commentators look for new ways to talk about plunging markets—and plunging 401(k) balances.
You’ve heard it before: Stay the course. Don’t sell when your assets are valued at the lowest point.
Is this “do nothing” message always correct? Could it lull you into making a bad decision?
The idea of not making any market moves is based on the assumption that before the bear market started and the recession kicked in, you were rational and had put together a balanced portfolio—diversifying your risks and reflecting your risk tolerance.
Universal lessons are just that—they apply to everyone, or almost everyone. Sometimes, though, even the most knowledgeable people stray from what they know to be the better decision.
For example, asset allocation is critical, and rebalancing should be done periodically—particularly if your portfolio is more than 5% out of balance. At Vanguard, we promote these practices quite regularly. They’re good practices that disciplined investors should—and do—incorporate into their investing decisions.
What’s surprising (though maybe it shouldn’t be) is that, as a January Wall Street Journal article by Jason Zweig explains (subscription required), even some of the most well-known mavens of the investment world digress from their own investment philosophies.
