The first step was getting up the courage to look at my 401k statement. The next step was deciding what to do. I'd clung to my long-time allocation plan - a global stock fund; large-cap, mid-cap and small-cap value and growth funds; a bond fund - thinking that at least I'd be "buying low." That approach has lost its appeal as the market continues to sink. But I certainly wasn't thinking about pulling my money out of the funds.
Last week I finally took step three and made a change: I directed all my future contributions to the bond fund. And I stopped the automatic rebalancing that I'd had in place, because I don't want those future contributions to get redistributed among funds that don't look like they'll be going up any time soon. I figured I'd take a look every quarter and decide if and when I want to start automatic rebalancing again.
I'm no expert, but this seemed like a plan. And the March 4, 2009 Wall Street Journal appears to back me up. Jason Zweig's Intelligent Investor column
included this passage: "Change your new money, not your old money. In your 401(k), you could leave your existing positions in stock funds as they are. Bailing out completely is not the only option for reducing your exposure to stocks. You can take your new contributions from future paychecks and direct them into an investment-grade bond fund. You can always reverse this decision later; to make sure you remember, mark your calendar to review the choice one year from now."
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