- Sep 25, 2019
I did not make any gain during the same year but luckily didn’t lose money. My employer matched 100% of my contribution and add 6% ontop of it. The reason why I have a 401k account is due to this free money plus annual RSU from my employer. Beside, 401k isn’t the best investment for retirement as it is so dependent on unpredictable future tax rate. Just like unpredictable future market price. Tax deferred retirement fund doesn’t mean it won’t be taxed later at alot higher rate. Historically, tax has always gone up. 30 yrs from now when I retire, tax will eat up my 401k. Look at the example of the tax rate 30yrs ago compared to now.My employer gives me a choice of 28 funds to invest my 401K in, mostly from Vanguard. Until recently I invested in the most aggressive small-cap stock funds. I was making good money until the market dropped at the end of 2018 / beginning of 2019, which wiped out 5 years of gains. I stayed put and basically regained all my losses. Now most of it is in an index fund, with 10% in a bond fund.
I have no confidence in the market and USA is overdue for another recession, so when the S&P climbs up about 2 more percent, I’ll convert everything into bonds. Theoretically I won’t be making as much as stock investments, but the stocks have been up and down in last several months they’re essentially flat. If I’m not gaining anything, I might as well put it in bonds.
As for the rainy day fund, I put it in an online savings account that gives back 1.9%. It’s not much, but it’s almost inflation-neutral, at the very least.
I watch market movements every day. Yahoo Finance and its charts are a big help.
I don’t believe in any investments where the control of money is on the financial institution instead of us. If things went south, not like you can borrow money from your 401k without getting ripped off by the gov.