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 »
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 »
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. »
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 »
7 October 2008 · 9:49 pm
I have reshuffled my 401K into Large and Middle Cap. All of it.
fillyjonk »
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….
marsha chesbro »
3 December 2008 · 3:54 am
i very upset and sixty,single.i ve worked two jobs for years to save for retirement.i want to retire at 62.iam sick.and tired.work is very stressful.i can see why people commited suicide in 1929.i tell the young people just spend it all and who cares.