In the sea of cubicles in my office, two of my coworkers were talking yesterday about their investments. As stocks — primarily our company stock — have increased a little from their recent lows, they seem to believe that this might be a good time to increase 401(k) contributions and enroll in the company stock purchase plan. One of the coworkers is my age and probably has about 30 years before retirement and the other coworker most likely has about 15.
I agree. Giving stocks decades to grow is probably a solid strategy. Some expert financial advisers are calling for more tragedy in stocks for the next year, however. “Dow 4,000” is a phrase I’ve seen thrown around quite a bit. I do believe that people tend to predict numbers too low for the lows and numbers too high for the highs, but it’s hard to determine which predictions are overblown. A survey of chief financial officers shows that 60% of the sample don’t expect the economy to recover for at least a year. The survey was conducted by the Duke University’s Fuqua School of Business and CFO Magazine, who claim CFO predictions have proved to be accurate. With that in mind, the fact that CFO’s confidence in the economy is the lowest it has been in the 12-year history of the survey is a little disheartening for anyone who is looking for stocks to recover soon.
I recently increased my 401(k) contributions to 50% of my salary — the maximum deferral rate — to come closer to taking full advantage of the investment opportunity. I’ve also been investing 10% of my salary in the company stock purchase plan, as I have been since the plan was initiated. I’m happy to continuing buying into the stock market while the prices are lower than they have been in the past few years, I’m hoping that I’m giving myself enough time for the stocks to increase above inflation.
Updated January 1, 2018 and originally published December 11, 2008.