Q. Last fall, when we were approaching the fiscal cliff, I made the mistake of transferring my L2030 fund into the G Fund because I believed the market was going to have a significant drop due to the instability of the federal budget. At the time, the Dow Jones was around 14,000. Long story short, my funds are still in the G Fund and the Dow Jones has now exceeded 15,000. I don’t know when to transfer them back to the L2030 fund because I feel like I’m buying high right now. What are your thoughts?
A. You’re not qualified to manage an investment portfolio. Either take some courses in statistics and pension fund management techniques, or find someone to help you who knows what they’re doing.
3 Comments
Just chalk it up to “You were wrong…No big deal”. Experienced money managers are wrong all the time. I am not a professional, but I say move it back at say 25% at a time monthly and just get it back in there. Depending on how long you have to work, I wouldn’t do a lot of moving $ around, just rebalancing. Now, this is assuming your entire portfolio is already balanced.
Educate yourself with all the free resources out there and keep it simple!
MM, I love your pity comments.
An unhelpful non-answer by Mike. Hopefully, you’ve rectified this error with your current contributions. It depends on how long you have until retirement. If you have ten years or more, you’re probably best moving it all back at once, because most studies show that lump sum investing beats dollar cost averaging most of the time–you want more of your money working for you as long as possible. However, if you are skittish, then moving it back in segments like RBSee suggests is the way to go.
Let this be a lesson on the folly of trying to time the market. I do agree with Mike that the best course for most people is to contribute to the L fund that most closely matches life expectancy and leave it at that.