My 401k Strategy

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Hey everyone,

A bunch of people in the news media have been talking about how 401k values are declining because of the languishing stock market. 401k choices are necessarily less risky because people intend to use those funds to provide them with a comfortable nest egg. However, I have been more actively managing my 401k to prevent massive losses that others have been seeing.

First of all, I was 100% in bonds from October to March. I avoided the major crash from a 14,000 Dow to a 12,000ish dow in march. Since then, I have slowly been moving my money from bonds into the index fund. My bi-weekly contributions go into bonds (with the exception of my company match - which is in company stock).

Over time, I have been shifting a few hundred dollars from my bond funds into the index funds when the stock market would pull back at least half a percent. Therefore, instead of losing around 15% if I was just investing in index blindly, I controlled my index purchasing, and have only lost 2% as of Monday August 25th. Actually, at market close on Friday the 22nd, I was only down one tenth of one percent whereas the market was down 16 percent.

Much of my savings came from avoiding the major crash in February - but my management also lead me to beat the market by about half a percent after that time period. Now, I'm a 98% index fund and 2% bonds. I'll be a bit more bonds every friday, but it is my current intention to stay well above 90% in index from here for at least a few years.

Also, I will never, ever touch the mutual funds that are offered in my 401k. Their fees are ridiculous.

Half a percent? Are they out of their mind?

Just to note, most people who actively manage their 401k tend to lose more money that the market would have. But for the time being I've found this "bond to index" strategy effective.

-Mansij Hans, E.I.T.
Member, Intigril Capital Management