8 ms·

What really irritates me is that for a whole generation of people, there is really no other way to prepare for retirement than to throw your money into the stoc

What really irritates me is that for a whole generation of people, there is really no other way to prepare for retirement than to throw your money into the stock market via a 401k. And it's a rigged game. If you try to move your 401k from stocks to bonds it will take 2 full trading days; in that time the market can drop 30%. The exit doors are narrow and you're not first in line. Especially if you've put money in at the top of the market- expect to get screwed.

wtvanhest 9y ago
You're not supposed to try to time the market. The delay is a feature, not a bug.
- fallingfrog 9y ago
  It's a feature when you consider what the intended goal of the system is, which is not to help you fund a comfortable retirement.
tc313 9y ago
It’s rigged against you if you’re implementing a strategy for which two days makes a big difference. But buying and holding a diversified portfolio has been shown to outperform the majority of hedge funds (after fees) over the long-haul.
- teej 9y ago
  Exactly this. Whatever happened to “you can’t time the market”? Don’t day trade with your 401k.
  - jnordwick 9y ago
    You should only short term trade with your 401k. It sounds perverse i know, but there is no tax liability for changing your position. Your long term trades will get a lower capital gains rate regardless.
    - tptacek 9y ago
      You're saying, "if you're going to short-term trade, you should use your 401k to do it in preference to any other funds source", right? Because there's a way to read this where you're saying "the only way you should trade with your 401 is short-term".
      - jnordwick 9y ago
        Lol. The first. Traditional 401k incentives line up horribly with saving for the future. And if you expect taxes to rise, an unmatched 401k might would be an on balance negative except for the tax free rebalancing you can do.
        dctoedt 9y ago
        I'm going to use this conversation as a teaching example in my law-school contract drafting course. (In contract disputes, the parties' lawyers will often look for exploitable "security holes" of this kind, i.e., places where the contract's language can plausibly be interpreted in multiple ways and the choice of interpretation affects the outcome of the dispute. A big part of the job of contract drafters and reviewers is to try to spot and eliminate such weaknesses before the contract is signed, but that doesn't always happen.)
        jnordwick 9y ago
        I did some work one time for a patent attorney. When he was teaching me how to draft patents, I being on the minimalist side would always balk at repetition - such a long lists of items that are especially synonymous or things already stated elsewhere. He agreed that they were kind of dumb and repetitious but the purpose was to have it on multiple places in case it was vague (or too specific!) in any single description. It annoyed me to no end. Also the recent Maine dispute over the oxford comma kind of made me understand that better.
        dctoedt 9y ago
  - mancerayder 9y ago
    "Day Trading" is one thing, namely the strategy of unloading all positions at COB. That's stupid. But picking companies YOU think might succeed, either because you've used their products, have a good feeling, read a news article, worked there, read magazines on the niche industry, or a million other things, is perfectly legit. You don't need to time the market. You can invest long-term in your picks. You CAN time the market, if you notice patterns and feel like you can ride them. Not everyone who isn't conservative is necessarily a child "playing" with a brokerage IRA. Some ARE beating the market.
    - kaybe 9y ago
      Buying stock of local companies can also be nice since they invite you to meetings and pay for food and occasionally transport (at least in Germany).
- fallingfrog 9y ago
  There's no guarantee of positive returns over any timeframe- Japan's stock market is still lower than it was in the late 80s. And when the market goes down, it goes down fast.
  - mancerayder 9y ago
    That's a strong argument against index funds if I ever heard one.
    - loeg 9y ago
      No it isn't? It's an argument for holding international indices too, not just S&P500 exclusively.
- bjourne 9y ago
  Is that why 99.9% of the finance industry is about investments in which two days makes an enormous difference?
  - tptacek 9y ago
    By all means, just make numbers up.
  - semi-extrinsic 9y ago
    The reason why lots of the finance industry is about managed funds is that they can create more money for themselves from charging clients fees than they can from investing their own money in index funds.
  - andrewjw 9y ago
    Most of the finance industry is also not about profits on the time-scale of retirement savings, or about minimizing variance for every sample.
tinokid 9y ago
Well mine doesn't take two days. But yeah, the whole point of 401k was so business could use peoples' retirement savings as blackmail to get them to vote for business-friendly policies.
- nyolfen 9y ago
  the point is the kickbacks your employer gets from the administrative fees
vonmoltke 9y ago
> If you try to move your 401k from stocks to bonds it will take 2 full trading days That is not a "will". I have never had an account of any kind where it takes two business days to transfer money from one position to another. > in that time the market can drop 30% "Can" with what likelihood? In discussions like this (and hiring, and health care) people live to trot out very low probability worst cases couched with "can".
- brewdad 9y ago
  If you are invested in mutual funds, like most 401ks are, your fund will only "trade" at the price at the close of the day. In this sense, an order to sell placed Wed morning won't actually sell until after market close Wed. Then Thursday you place an order to buy a new fund and the buy takes place at the close of Thursday business. You don't fully know exactly how many shares of the new fund you own until Friday morning. Every 401k I've dealt with allows you to place the buy/sell simultaneously, so you really only have a one business day turnaround, but I wouldn't be shocked to hear that some don't allow this.
- wocram 9y ago
  If you hold ETFs sure, but most people are holding the mutual fund equivalents that only trade at the end of each day.
deleted 9y ago
[deleted]
justherefortart 9y ago
401k works by reliably investing every paycheck over decades. Not buy guessing when the high and low is. The fact you can't see any other way to save for retirement is also comically sad.
- AlexCoventry 9y ago
  I think many who were due to retire around 2001 or 2008 would disagree that it works.
  - twtw 9y ago
    It still mostly worked fine? In 2001-2002, S&P500 was still higher than it had been for all but 5 of the last 40 years (after adjusting for inflation). So it was far more effective than hoarding cash. 2008-2009 was slightly worse, but the same idea still applies. The transition away from pension plans leaving people unprepared for retirement was probably a much bigger issue than the state of the stock market at retirement.
  - justherefortart 9y ago
    If you're all in on the day of retirement, you should have hired a financial advisor decades before. Here's how this works for those that haven't even bothered to read anything related to retirement planning. You slowly move from high risk/volatile investments to those that are lower risk. Something like Bonds might work. You also have your own small hedge with things like precious metals (less than 10% typically). One can also move their money to assets that typically appreciate but also generate reliable income (real estate for example, but annuities, etc., are options). Hell, even read the cheat sheet and you'll know more than most people (seemingly): http://www.dummies.com/personal-finance/financial-help/personal-finance-for-dummies-cheat-sheet/ http://www.dummies.com/personal-finance/financial-help/perso...
logicallee 9y ago
Just FYI your complaint is literally that you can't panic fast enough. Some would advise you not to sell during a panic correction.
jorblumesea 9y ago
Sure, if you day trade. But if your timeline is 20 years, none of this matters. If you believe the market will be here in 20 years, index the S&P and get a good nights sleep. If you don't, invest in guns and ammo.
- fallingfrog 9y ago
  If you bought stocks right at the top in 1929 and hodled them until 1980.. you would have lost money.
  - refurb 9y ago
    Source? I find that hard to believe unless you ignore stock splits, dividends, etc.
opportune 9y ago
The 401k was a clumsy attempt to align the middle-class with the interests of big-capital. It allows very wealthy people to hold middle-class people's retirements hostage when it comes to labor laws and anti-trust
- txsh 9y ago
  The 401k was a way for companies to stop providing pensions to their employees.
  - marnett 9y ago
    it is a multi-faceted vehicle that aligns multiple parties into shared incentives.

wtvanhest 9y ago

You're not supposed to try to time the market. The delay is a feature, not a bug.

fallingfrog 9y ago
It's a feature when you consider what the intended goal of the system is, which is not to help you fund a comfortable retirement.

tc313 9y ago

It’s rigged against you if you’re implementing a strategy for which two days makes a big difference. But buying and holding a diversified portfolio has been shown to outperform the majority of hedge funds (after fees) over the long-haul.

teej 9y ago
Exactly this. Whatever happened to “you can’t time the market”? Don’t day trade with your 401k.
- jnordwick 9y ago
  You should only short term trade with your 401k. It sounds perverse i know, but there is no tax liability for changing your position. Your long term trades will get a lower capital gains rate regardless.
  - tptacek 9y ago
    You're saying, "if you're going to short-term trade, you should use your 401k to do it in preference to any other funds source", right? Because there's a way to read this where you're saying "the only way you should trade with your 401 is short-term".
    - jnordwick 9y ago
      Lol. The first. Traditional 401k incentives line up horribly with saving for the future. And if you expect taxes to rise, an unmatched 401k might would be an on balance negative except for the tax free rebalancing you can do.
      - dctoedt 9y ago
        I'm going to use this conversation as a teaching example in my law-school contract drafting course. (In contract disputes, the parties' lawyers will often look for exploitable "security holes" of this kind, i.e., places where the contract's language can plausibly be interpreted in multiple ways and the choice of interpretation affects the outcome of the dispute. A big part of the job of contract drafters and reviewers is to try to spot and eliminate such weaknesses before the contract is signed, but that doesn't always happen.)
        jnordwick 9y ago
        I did some work one time for a patent attorney. When he was teaching me how to draft patents, I being on the minimalist side would always balk at repetition - such a long lists of items that are especially synonymous or things already stated elsewhere. He agreed that they were kind of dumb and repetitious but the purpose was to have it on multiple places in case it was vague (or too specific!) in any single description. It annoyed me to no end. Also the recent Maine dispute over the oxford comma kind of made me understand that better.
        dctoedt 9y ago
- mancerayder 9y ago
  "Day Trading" is one thing, namely the strategy of unloading all positions at COB. That's stupid. But picking companies YOU think might succeed, either because you've used their products, have a good feeling, read a news article, worked there, read magazines on the niche industry, or a million other things, is perfectly legit. You don't need to time the market. You can invest long-term in your picks. You CAN time the market, if you notice patterns and feel like you can ride them. Not everyone who isn't conservative is necessarily a child "playing" with a brokerage IRA. Some ARE beating the market.
  - kaybe 9y ago
    Buying stock of local companies can also be nice since they invite you to meetings and pay for food and occasionally transport (at least in Germany).
fallingfrog 9y ago
There's no guarantee of positive returns over any timeframe- Japan's stock market is still lower than it was in the late 80s. And when the market goes down, it goes down fast.
- mancerayder 9y ago
  That's a strong argument against index funds if I ever heard one.
  - loeg 9y ago
    No it isn't? It's an argument for holding international indices too, not just S&P500 exclusively.
bjourne 9y ago
Is that why 99.9% of the finance industry is about investments in which two days makes an enormous difference?
- tptacek 9y ago
  By all means, just make numbers up.
- semi-extrinsic 9y ago
  The reason why lots of the finance industry is about managed funds is that they can create more money for themselves from charging clients fees than they can from investing their own money in index funds.
- andrewjw 9y ago
  Most of the finance industry is also not about profits on the time-scale of retirement savings, or about minimizing variance for every sample.

tinokid 9y ago

Well mine doesn't take two days. But yeah, the whole point of 401k was so business could use peoples' retirement savings as blackmail to get them to vote for business-friendly policies.

nyolfen 9y ago
the point is the kickbacks your employer gets from the administrative fees

vonmoltke 9y ago

> If you try to move your 401k from stocks to bonds it will take 2 full trading days That is not a "will". I have never had an account of any kind where it takes two business days to transfer money from one position to another. > in that time the market can drop 30% "Can" with what likelihood? In discussions like this (and hiring, and health care) people live to trot out very low probability worst cases couched with "can".

brewdad 9y ago
If you are invested in mutual funds, like most 401ks are, your fund will only "trade" at the price at the close of the day. In this sense, an order to sell placed Wed morning won't actually sell until after market close Wed. Then Thursday you place an order to buy a new fund and the buy takes place at the close of Thursday business. You don't fully know exactly how many shares of the new fund you own until Friday morning. Every 401k I've dealt with allows you to place the buy/sell simultaneously, so you really only have a one business day turnaround, but I wouldn't be shocked to hear that some don't allow this.
wocram 9y ago
If you hold ETFs sure, but most people are holding the mutual fund equivalents that only trade at the end of each day.

deleted 9y ago

[deleted]

justherefortart 9y ago

401k works by reliably investing every paycheck over decades. Not buy guessing when the high and low is. The fact you can't see any other way to save for retirement is also comically sad.

AlexCoventry 9y ago
I think many who were due to retire around 2001 or 2008 would disagree that it works.
- twtw 9y ago
  It still mostly worked fine? In 2001-2002, S&P500 was still higher than it had been for all but 5 of the last 40 years (after adjusting for inflation). So it was far more effective than hoarding cash. 2008-2009 was slightly worse, but the same idea still applies. The transition away from pension plans leaving people unprepared for retirement was probably a much bigger issue than the state of the stock market at retirement.
- justherefortart 9y ago
  If you're all in on the day of retirement, you should have hired a financial advisor decades before. Here's how this works for those that haven't even bothered to read anything related to retirement planning. You slowly move from high risk/volatile investments to those that are lower risk. Something like Bonds might work. You also have your own small hedge with things like precious metals (less than 10% typically). One can also move their money to assets that typically appreciate but also generate reliable income (real estate for example, but annuities, etc., are options). Hell, even read the cheat sheet and you'll know more than most people (seemingly): http://www.dummies.com/personal-finance/financial-help/personal-finance-for-dummies-cheat-sheet/ http://www.dummies.com/personal-finance/financial-help/perso...

logicallee 9y ago

Just FYI your complaint is literally that you can't panic fast enough. Some would advise you not to sell during a panic correction.

jorblumesea 9y ago

Sure, if you day trade. But if your timeline is 20 years, none of this matters. If you believe the market will be here in 20 years, index the S&P and get a good nights sleep. If you don't, invest in guns and ammo.

fallingfrog 9y ago
If you bought stocks right at the top in 1929 and hodled them until 1980.. you would have lost money.
- refurb 9y ago
  Source? I find that hard to believe unless you ignore stock splits, dividends, etc.

opportune 9y ago

The 401k was a clumsy attempt to align the middle-class with the interests of big-capital. It allows very wealthy people to hold middle-class people's retirements hostage when it comes to labor laws and anti-trust

txsh 9y ago
The 401k was a way for companies to stop providing pensions to their employees.
- marnett 9y ago
  it is a multi-faceted vehicle that aligns multiple parties into shared incentives.