Welcome to another installment of #AskGradMoney, where on Facebook, Twitter or Instagram, you can send any or all of your money, stock market, budgeting, retirement, estate planning -- literally any money question to GradMoney and we will respond in the form of a blog post so other folks can benefit from our response. If you wish to have your name published with the question, just let us know, otherwise you'll be listed as "anonymous."
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"Even though the market has been rising higher recently, I'm still very worried. I'm edging towards retirement and my 401(k) accounts don't have stop loss provisions to prevent me from losing all of the gains in the bull market if it should choose to end tomorrow. Then it's like 2008 all over again! Is it better to move my money into a money market account, a defensive stock (like a utilities company) or something physical like gold? Thanks!
It is certainly not usual to be worried about when and if the stock market will pull back, however you need to remember that making any changes to your investments that are simply based on "fear" or "greed" (i.e. what investors USUALLY base their decisions on) will almost always end up in failure. Just because the market could tumble and give up all your returns at any second doesn't necessarily mean that that will happen. In general, I would say that for the moment, despite what the market does, the economic situation in the US is relatively stable so there isn't a mad rush to make any big changes to your 401(k) anytime fast.
Asset allocation is extremely important, especially given that you're so close to retirement. You don't want to put all your eggs in one basket -- you don't want your money to be so safe that it gains no value at all, and you don't want to be so reckless that you lose it all. There's a balance here.
One thing I suggest many people do with their retirement funds (namely 401(k)s) is to check out "lifestyle" or "age-based" funds offered by your retirement provider. These are great because they take a lot of the guesswork out of asset allocation. Depending on your age, lifestyle and risk-tolerance, the funds will rebalance to fit your situation and you don't have to worry if your funds are properly diversified.
At the very least, don't be scared -- it's just the stock market and the only time to react based on nerves is to when things are fundamentally flawed in the economy. So far, we are holding on quite well. All the best to you in your future endeavors!
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