Section III-A - Lesson 5
Your 401k - Leaving Well Enough Alone
Having arranged for your contribution, and having selected your investment, you arrive at what is for some people the hardest part of managing a 401k program - leaving it alone and letting it grow!
You've done everything right so far, if you've followed these suggestions, but it's amazing how much irreparable damage you can do, and very quickly, if you don't learn to leave things alone.
Some people seem to be obsessed with tinkering with their 401k. They want to vary the amount of their contribution based on what they think the market is going to do, or they want to constantly switch back and forth between investments in the hope of gaining some perceived advantage.
Or, even worse, they make disastrous moves in times of market turbulence, instead of riding out the storm. They bail out of stock funds at what proves to be the bottom and move this money to a money market fund, only to move back to stocks several months later, at much higher levels, with much less money than they started with.
Learn how to stay put! You are following a well conceived overall master plan and the periodic ups and downs of the market place mean absolutely nothing to your ultimate success.
Do not delude yourself into thinking you can outwit the market. The best minds on Wall Street can't do this consistently and neither can you. Don't even think about changing your investments around because you "think" the market is getting ready to go up or down or sideways. Leave things alone!
Don't let yourself get sucked into a pessimistic mindset when the world seems to be going to you-know-where in a hand-basket. There will come a time in the future when stocks are plunging, the economy is tanking, and the media is predicting the end of the world. Just say to yourself, "This too shall pass," and do absolutely nothing in the way of changes to your 401k.
Stocks have never failed to recover and go higher after all sorts of horrendous, unsettling events during the past 200 years or so, including the Civil War, World Wars I and II, and the Great Depression. Don't think for a moment that this may turn out to be the first and only time in history that stocks do not recover.
Anything you try to do to your 401k to protect it or enhance it will backfire, right in your face. Trust me when I tell you that once you've put your contribution in place and selected your investment, the very best thing you can possibly do is absolutely nothing!
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