"Stop Contributing to your 401(k)"

I am not advising that, but it's what I overheard while out at dinner this past Saturday. "If you put your money in your 401k, you are just going to lose it anyway." When my grandfather was still alive he told me to do the opposite of everyone else and I would be wildly successful. I have found that to be good advice time and time again...In the beginning of 2000, everyone was talking about the secretary at Netscape who became a millionaire...By April, the dot com companies were known as the "dot bombs." A financial commentator once said that "when people are greedy, you should be fearful and when people are fearful, you should be greedy."

Many people have seen the values of their 401k's drop in value, so instead of wanting to contribute more, they want to contribute less or discontinue contributing altogether. We must follow the golden rule of investing "buy low, sell high." Unfortunately, our emotions can play dirty tricks and take us to Jerry Seinfeld's "bizarro" world...where up is down and down is up. Most investors buy high and sell low since they allow their decision to be based on popular sentiment and not logic. When everyone is talking about the great performance of a particular stock, they buy and when others get scared, they sell. They have just bought high and sold low. The law of averages tells us that to create an average, you need both high numbers and low numbers. If the stock market has outperformed dramatically, then it may be time for a period of underperformance.

It's believed that 20% of employees have ceased contributing to their 401k plans in the last year. If you decide to halt contributions until the market stabilizes, then you are saying that you would rather pay higher prices for stocks and you spurn the idea of taking advantage of lower prices. It's normal to allow our fears to play a part in our decisions, but logic needs to lead our actions toward greater success.

Want to know what other people are thinking? Here is a poll from Yelp

Wishing You Wealth in all its Greatest Forms

Alex