With the stock plunging today, is it better to rebalance my 401(k) portfolio to more bonds than stocks?

Question

With recession looming and DOW taking a nose-dive today, should I rebalance my 401(k) portfolio? I'm 31 years old, and have 80% in stocks and 20% in bonds. To minimize my losses in stocks, should I increase my bonds and reduce stocks.
Doesn't the bonds appreciate in value with Feds cuts interest rates anyways?

Answer 1

same question that was asked when this happened before. Honestly, I am buying stocks right now. It will go back up again. I dont keep alot of high dollar stocks anyway. too much of a risk if somehting bad happened. I try not to keep more than 10 grand in any one stock. if it crashes I can pick that back up in a month with some clever daytrading.

Answer 2

Might not be the "greatest" time to get out of stocks, with a 3/4 rate cut on the table and today's rebound (ie V shaped bottom). There's a good chance this will pump some blood into the equities, at least for a little while.



Take a look at the following chart of the 2001-2003 recession. Note the various peaks and valleys. Try to visualize the current bear market in a similar fashion. Then, base the readjustment of your portfolio on that.



http://www.financialsense.com/editorials/griess/2004/0727.html



If you had wanted to readjust, you should have been following the markets (and long term charts) four months ago, and noticed the August sell off, banking problems, etc. at that time. When the world's largets fund loses 30% of its value as it did in August, that's something that should make you wonder whether you should be holding on to stocks.



IF your horizon is very long term, then sure, you could readjust right now. You probably won't be selling your stocks at the best possible time. But I would say there's a really good chance of lower markets six months to a year and half out.



Remember everyone: this is just the BEGINNING of a bear market.



Look at your history. Look at historical charts.

Answer 3

You do not want to sell any of your existing stocks while they are down. If you have an option to redirect future contributions only that could be an option, but at your age I would not make a move unless it is keeping you up at night.

Answer 4

You're bascally asking "how can I time the market to get a better gain than a buy-and-hold strategy."



To do that, you have to be right twice.

You have to time your exit from stocks, and your entry back in.



The time to exit was when the Dow was 14,000. (Bonus points if you figured it out then, and not now)

The time to enter is when the market hits bottom, which (at 11,900) could be today, or it could be several months from now (at Dow 11,000 or 10,500, or 9,500)

Answer 5

No you should rebalance it to get more stocks and less bonds!

Answer 6

I moved most of my money into money market funds - I'll take +3% over -10% any day for a year or two - and I'm 48.

Answer 7

buy low sell high, that is still rule no one.