401k Q&A

The following questions are real, and we hope our answers are real helpful. See what’s on the enquiring minds of our actual members as we tackle anything and everything (you’ll see) happening with regards to their – and your – 401k.

 

“I’m on vacation and turned on the news this morning. I’m four years away from retirement and wondering what you’re going to do with my account if/when Trump starts WWIII.”

My first most important piece of advice for you while you’re on vacation, especially given everything going on in the world right now is to avoid the TV and as much access to the outside world as possible. Secondly, even in the unlikely event that we were to find ourselves in the middle of WWIII, no one knows what that would mean for stocks. I think we can be pretty certain that in the short term we’d see some significant volatility, but shockingly, stocks have actually done extremely well historically during just about every major war. History can be comforting, but there are of course no promises that another war would see the same results for stocks. Rather than trying to guess or panic and risking future growth on your account IN retirement, it’s important to remember that this is exactly why global diversification using both stocks AND bonds is so important. A heavy portion of your account should be held in fixed income, which potentially reduces any stress to your portfolio.

 

“Since Bitcoin is under $10k again, I want in. How can I do that in my 401k? And tell me why I shouldn’t. It is the future of money after all.”

Don’t mistake Bitcoin and other cryptocurrencies for an investment, especially in an account with a very high priority goal like retirement. First off, you’re not going to have a way to get exposure to cryptocurrencies in your 401k as things stand today. And even if you could, I wouldn’t put anything into Bitcoin or other cryptocurrencies that you wouldn’t be okay losing all of within your first 20 minutes of entering a casino.

 

“I was wondering if medical marijuana stocks are worth betting on in their current early stages. I would love some more insight on who to keep my eyes on.”

We’ll be blunt: Although individual stocks are outside our area of expertise, any investment in a single stock or sector is going to carry a higher risk than a diversified portfolio. So, it’s important to keep the investment to a small portion of your overall wealth. There may be some funds or ETFs targeted at the sector, and that would be a good way to diversify more than a single stock. In most emerging sectors, it’s very hard to predict which companies in that sector are going to succeed. You could be right on the success of the sector, but pick the wrong stocks within that sector and miss the gains entirely. A sector fund or ETF is a good way to minimize that risk.

 

*The information is provided for discussion purposes only and should not be considered as advice for your investments. Investing involves risk. Your investments are subject to loss of principal and are not guaranteed.

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