401k in recession

[glinka]

I've been retired one year, age 57. I have 401k with Fidelity. Right now I'm 30% in bond mutuals rest in equity mutuals. Where should I be if I think a recession is coming? I don't want to take any money out until I reach 62.

Thanks

Sooner

 

[yakers]

You could increase the % of bonds in your AA. I expected 2007 to be good and 2008 to be bad financially. So far I am still up for the year but not looking so great, and 2008 still dosen't look good to me. But my .
changes are not drastic. My primary retirement account is in a target retirement type fund and that keeps me from playing with the AA. We are moving my wife's IRA into Wellesley from more aggressive funds. Something like Wellesley is a good place to hole up IMHO. But you still need to hold some stocks are really safe investments just don't have a lot of return.

 

[FinanceDude]

I've been retired one year, age 57. I have 401k with Fidelity. Right now I'm 30% in bond mutuals rest in equity mutuals. Where should I be if I think a recession is coming? I don't want to take any money out until I reach 62.

Thanks

Sooner

1)It depends on the allocation in the equity mutuals. Dividend paying stocks and recession-proof stocks like food and gasoline and comglomerates like Proctor and Gamble tend to do better in a pullback.

2)If the fed cuts rates, bonds will do well, as folks that own bonds will get appreciation, as new debt issued will have lower yields, making the higher yielding bonds more valuable.

 

[FinanceGeek]

2)If the fed cuts rates, bonds will do well, as folks that own bonds will get appreciation, as new debt issued will have lower yields, making the higher yielding bonds more valuable.

With interest rates already very low by historical standards I wouldn't count on much in the way of capital gains from a bond fund. I think that over time, you should only count on making somewhere around the coupon rate...

While I understand the AA theory behind owning bonds, it just doesn't seem like there's much potential reward in them. I personally tend more towards dividend oriented stocks for the income portion of my portfolio.

Although we're not supposed to be market timers, it seems like a no-brainer to lighten up on domestic equities if you believe that one party will control both legislative and executive branches of government after 2008. Regardless of one's political affiliation it seems clear from the last 20 years of history that neither party can really be trusted with that much power without inflicting terrible consequences on the economy.