Stop Trying to Track the Market
Welcome back to Statement, Lifehacker’s personal finance newsletter. Have a question? Send an email to tips@lifehacker.com or reply to this email.
If there is one truism about investing, it is that no one can count time in the stock market. And yet … we try hard. Money.com reports :
Bad trading decisions resulted in the average American investor losing about double the fall in the S&P 500 in 2018, according to new research by Dalbar, a financial services marketing firm. The S&P fell 4.38%, while ordinary investors lost an average of 9.42% over the year.
According to the Dalbar post, investors in general have withdrawn money from the market every month the S&P made a positive profit. August is a good month for the market, for example the S&P returned 3.26% versus 1.8% for the average investor. In October – a bad month for equities – the S&P fell 6.84% and investors lost almost 8%.
What does it mean? This means that retail investors (you + me) reacted negatively to the sharp fluctuations in the stock market in the past year, which led to the fact that money was withdrawn at the wrong time, and investing more – in the wrong one.
Again, you cannot time the market . Wall Street cannot time the market. Nobody can tell the time in the market. Easy to scare (I have moments of doubt too), but if you are investing for retirement / long term, the only thing you can do is invest consistently long term, buckle up and leave it alone.
Learn more about it: What to do during the stock market frenzy + how dollar value averaging works .
Reader question: how to improve your 401 (k)
We had a few questions from readers this week about how to research index funds and potentially improve a bad 401 (k) situation. Stephen M. asks:
Have you written an article on how to invest in 401 (k) jobs and matches, basically how to navigate and research existing funds in plan and create the best diversified portfolio for a situation where you can use limited options?
This is of course worse than any other investment because no matter where I worked it was tied to about 20 funds and almost all of them will have an expense ratio of 1.0% and will generally not be the same as I would choose if I had my own choice. … Also, some jobs will correspond to the stock of the company rather than the actual stock bought as a result of someone else’s investment choices ?.
I helped a friend with her finances and many of those 401 (k) in the workplace will have a default subscription that will start at two to four percent and will increase by one percent per year, regardless of the percentage the job gives. …
On top of that, he also signed it to an actively managed, time-bound plan that had a much higher expense ratio than the other index offerings in the plan.
In her case, since she has a high int. credit card debt, I found that her one percent annual increase brought her to six percent, while her job was only four percent. Obviously, in this case, it made sense to lower it to four percent at the appropriate level and use the additional two percent to pay off credit card debt / increase cash flow.
Stephen here pointed out one of the most common complaints about 401 (k) s jobs: they have limited investment opportunities and can have quite high fees, depending on where you work.
If you’ve done your research and the situation is really dire, then my general advice in this situation would be to contribute to the employer’s match (because if you don’t, you will leave money on the table) and then go outside. your workplace. Which direction you go will depend on your individual situation, but there are several paths you can read about here .
After this was posted, another Stephen said the following:
Could you be thinking: 1) write an overview of the financial instruments available to search for stocks: Yahoo Finance, Morningstar, etc. 2) key pieces of information that we need to analyze along with an explanation of why.
Well Stephen II, I thought! This is quite easy to do. I’ll show you how to research fund offerings here .
And if you are sitting here wondering how to even find out about seperating from your 401 (k) employer, I will bring it up here . Basically what you’re looking at: fund options (you need index funds), fund-related fees (the lower the expense ratio, the better), and any minimum investment.
This week’s review
Here are some more stories from the past week that you might like:
- The Apple Card is just a regular bonus credit card : it doesn’t exactly change the rules of the game.
- How to Know When Index Funds Are Not a Good Deal : A nice addition to the reader’s questions discussed above.
- It’s time to unsubscribe from your favorite brands on Insta : because in-app purchases have become so much easier.
- Use your Priority Pass to get $ 28 off at select airport restaurants : a little-known perk.
- How to make your finances more flexible before the next recession : It will happen, it’s just a matter of when.
- Follow Elizabeth Warren’s excellent budgeting advice : She literally wrote a book about it.
- Don’t have a reserve fund? Aim to Save $ 250: There is some evidence that this is the perfect starting point for preventing financial disaster.
- Compare your child’s Roth IRA contributions : to stimulate savings.
- Give your Venmo balance back : otherwise it might end up in collections.
And Lifehacker is hiring a personal finance writer ! Here are some details:
Lifehacker immediately has a full-time career as a personal finance writer . This is a full-time position with competitive salaries and good benefits, working from New York or remotely from Gizmodo Media. You will tell and write stories, act in videos, go on adventures and introduce our audience of tens of millions of best-in-class journalism services.
We are looking for someone who has been writing about personal finance for a consumer-oriented store for at least two years.
That sounds good? Apply now!
That’s all for this week. Be sure to check out other articles on Two Cents .