There is a nice article on about.com called Down Markets Good for Many Investors, talking about how a down market can be a good thing for your young 401k.
Being a young professional, you have many years ahead before retirement. This gives our 401k’s and other mutual fund investments plenty of time to turn around. The down market is actually a great time to buy shares at a bargain price which is one of the most basic investing strategies, buy low and sell high. With time and history on your side, chances are the market will go way up from today.
Here is an excerpt from the Article:
Taking the average is nice, but lets put some money on the line. If we put $1,000 per quarter into each scenario, here’s what happens:
Steady Growth
Shares Owned: 1,655
Portfolio Value: $73,544Down Market With Recovery
Shares Owned: 2,427
Portfolio Value: $107,809If you would like to see the full study, click here.
August 25th, 2008 at 10:15 am
Very good article. This strategy works as long as you do your HW on what to buy. You should read “The little Book of Common Sense Investing” it really tells you how this stragegy works.
September 10th, 2008 at 9:34 am
Question: What happens to a young investor if the equity market rises at an average annual rate of 6% over the next 20 years but inflation also runs at an average of 6% over the next 20 years?