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Worrisome Market

This article was written by in Investing. 26 comments.

I recently increased my pre-tax 401(k) contribution from 4% to 6%. It’s not a huge jump, and my company only matches that first 4%, but I feel like I didn’t save as much for retirement last year as I would have liked. My first paycheck with the increased contribution will be this Friday. I’m realizing that I’m buying more of the stock market when it happens to be at a 4.5 year high. This goes against the belief that it’s better to buy low and sell high. Perhaps I should just keep cash for a while.

Sorry for the lack of posts lately. They keep requesting that I get work done in the office, the nerve.

Updated December 20, 2011 and originally published February 27, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar Dus10

I am not all that happy with market returns these days either. Most funds have been running sideways for a while, and it is pretty bad. I am looking to get into some direct stocks soon. My focus is on stock that have a nice dividend. A good place to look for those types of stocks are REITs (Real Estate Investment Trusts). From my understanding, they are required to distribute 90% of their profits as dividends. I am picking up Simon Property Group (SPG) tomorrow because of this very reason (and they are an Indiana-based company, and I am from Indiana). The 1-year return, with dividends reinvested, has been 40.3%. There are plenty of other REITs that are performing well, also, that are in different markets and different styles of real estate. Beyond that, I am not sure of what else seems to have low-volatility and a decent return. I obviously don’t want everything in REITs. I am surely going to put some in bonds, especially I-Bonds, which are tax-deffered, and have a rate of 6.73%. Beyond that, maybe investing in European currency, considering the performance of the US Dollar. Mostly, I want to invest in myself and my abilities, so I am starting a business, and I will be directly investing in some long-term real estate.

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avatar TADollar

Pat yourself on the back for increasing your 401K contributions. I know it seems scary putting money into the market when the Dow is above 11K. But we are young and that money has years and years to grow. By keeping it in cash, you are losing the best thing we have going for us — time. Plus the “buy low, sell high” motto is usually applied to individual stocks and funds prices, rather than the market as a whole. I think you should decide what you want to buy with that money and do it. Good luck!

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avatar blog reader

Just a thought, have you considered depositing the amount over the company match into a Roth IRA? Instead of getting the tax benefit now, you could let that money grow tax-free until you reach retirement age. You would also get access to alot more investment options rather than being limited to company’s plan. Another benefit to the Roth is that you can withdraw the amount you deposited at anytime tax free. You only need to leave the amount you’ve earned in the account.

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avatar Phil

How do you know this isn’t a plateau, readying itself for a jump up? No one can time the market, as so much research has shown. You’re more likely to miss the point at which it begins to go up again if you don’t have your money in before it starts to go down. Over the long term, it doesn’t matter, because it will be compounding for so many years.

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avatar lloyd

Put the money into the market any way. It is really a matter of faith that the market will go up. I suppose that as long as the population keeps growing and spending, the market will go up. Also, the dividend pay out will help to reduce the average cost.

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avatar Quentin

Don’t worry……be happy! I think your investment in the market is fine the way it is. Sure, there will be ups and downs….and we might be close to a high. But putting your money in your sock isn’t the answer either. We don’t know where the next adjustment will me…or in what form. It could be inflation, which might actually get weathered nidely in the market. It might be a housing crash, which might also not affect the market all that much…who knows….it might kill everything. The market of mutual funds is also nice because if you are afraid of things going sour here, you can always shift some of the investment to companies that invest overseas. Keep a stiff upper lip and plow on!

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avatar Anon

Aren’t you discounting the value of tax-deferred investing that the 401(k) provides? Just because you put the money into the 401(k) doesn’t mean you have to buy stocks. Surely there is a bond or money-market fund available?

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avatar Luke Landes

Thanks for all the great comments. I’ll continue to invest in my aggressive portfolio because I still have time on my side. I already max out my Roth IRA, so that’s not an issue. My concern is not having enough cash when it comes time to buy a house in the next one to two years. Although I can withdraw my Roth IRA contributions to help with that, I’d rather not dip into retirement.

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avatar FMF

Good for you. If you raise your contribution bit by bit over the years, soon you’ll be maxing out.

And don’t worry about the market. If you’re steady at it for the next 30 years or so, you’ll have plenty of opportunities to buy at low prices.

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