The ostrich theory of investing
By coincidence, this is exactly how I’m handling my 401(k) at the moment. Megan McArdle explains the theory:
Don’t look. Seriously, don’t look. I have no idea what’s going on with any of my equity investments, because that is not short term money that I need to keep my eye on.
If you look you will get upset, and you will be tempted to do something stupid. I can’t guarantee that the market won’t drop further and you won’t regret having held on. But as a general rule, selling into a massive liquidity crisis is a pretty bad idea. Selling in a panic because your assets just dropped 30% is almost certainly a bad idea.
I am fairly decently hedged; I doubt I’ve lost that much. (At the end of the year they will send me a statement and I will know for sure, but I’m not going to spend my odd hours on their Web site getting up-to-the-minute bad news.)
Besides:
The good news is that while the stock market can take a long time to recover, it historically doesn’t actually go down for more than a couple of years.
Yeah, that’s not very good news. But unless you’re planning to retire right now, my advice remains the same: don’t look.
I’m at least seven years away, and by “seven” I mean “twelve,” assuming what’s left of Social Security doesn’t diddle further with the rules.
Dick Stanley said:
7 October 2008 @ 3:41 pm
Good advice even when you’re retired, like me. Don’t look, don’t worry. Markets go down, but they also go up. This one will, too.
fillyjonk said:
7 October 2008 @ 5:44 pm
I’m not exactly sure how many I’m away (I will meet the state’s “rule,” or at least what it was when I started working [years of service+age = 90] when I’m 60, but barring some health issue or a massive frustration with the student body of 2039, I’d hope to be still working. But that being a state pension, one can never be 100% sure of its continued existence).
I don’t plan on Social Security still being there for me. I consider it my “contribution” (involuntary, but what the heck) to help the folks who are retired now. (I felt happier about it when my auntie was still alive and I could at least put a face on “who” I was “helping” but whatever.)
I stopped looking at my TIAA-CREF and Vanguard statements sometime back in March.
I’m just hoping that interest rates don’t drop to the point where the bank starts charging ME for storing my money in a savings account….
Brian J. said:
7 October 2008 @ 9:27 pm
I bought some stock today.
Of course, it’s all liquor and firearms stock, which I think might do well in the downturn. At least until it’s time to use the actual liquor and firearms commodities.
Tatyana said:
7 October 2008 @ 9:49 pm
I have reshuffled my 401K into Large and Middle Cap. All of it.
fillyjonk said:
8 October 2008 @ 6:38 am
To revive an old joke from a previous downturn…
I’m considering investing it all in CDs.
Perhaps the James Brown box set, maybe some Motown….
dustbury.com » Linked be he who first cries, “Hold, enough!” said:
14 October 2008 @ 11:22 am
[...] the only one I can defend in this age of Politics as Comic Opera. (Your mileage may vary.) Example: I still haven’t looked to see what damage may have befallen my 401(k), which fact caused one of the Office Babes (this one, in fact) to look at me as though I were Nero [...]