Traditional IRA Question

[Kevin25]

I am 25 and started contributing significantly to my IRA and 401k at age 20. I currently have my retirement in a balance fund that is very aggressive. My questions is: Should I move it to a conservative fund due to the market being down. I have steadily earn negative percentage points for the past year. I am not sure if this is a smart move though... Any advice would be appreciated.

 

[Marquette]

Congrats on starting so young!

Long (looooongggg) term trends for the market is up. The trap of getting scared by market downturns is that you sell at a loss and then miss a future upswing. That said, you should pick an asset allocation that helps you sleep at night.

 

[WM]

Hi Kevin,

I agree, great job starting so early - that will really pay off down the road.

There are plenty of good threads here on asset allocation, and/or book recommendations. Most folks here think the answer is to educate yourself, choose an allocation, and stick with it. Personally, DH and I are mid-thirties with 7-8 years till early retirement, and the down market is fine with us - that money will be invested for decades and it's a great time to be buying.

By the way, what made you choose a traditional IRA over a Roth?

 

[DblDoc]

Kevin good job on an early start. I'd recommend reading from this list: Investment Books before making any changes. I would NOT make changes in response to current market conditions, that is the classic mistake most investors make and results in the "buying high and selling low" cycle that results in poor returns long term.

And ditto on the Roth question

DD

 

[Videonut85]

Jeeze, I thought I was starting young at 21. I've been beat!

I'm no stock market guru, but I would think that things will start turning around in the not so distant future, and all of the money you have in now will turn into a nice sum of money down the road. You've got plenty of years till you retire. I would just let your money sit where it is. Generally, the stock market gains in the long run.

 

[jIMOh]

Buy more now and keep adding to what you have set aside.

You can thank me for this advice later.

 

[Animorph]

I prefer to get more agressive as the market goes down. Hopefully your ride up will then be a little higher. When you thnk things are getting too good, then get conservative.

It's a little late to get conservative now. You're maybe down a little more than if you had been conservative at the start, so why jump to a conservative mix now and not go up as much when the market recovers. That's like jumping to higher performing funds just before they stop overperforming.

Of course, things could still get worse and a conservative portfolio might still be better for a while...