From Dana Dlott: “Hewitt Associates has introduced an index that tracks 401(k) activity – www.hewitt.com/401kindex.”
The index is based on more than a million employees of 40 big companies that allow daily switching among investment options. The idea is to get a sense of what people in general are doing from how this sample behaves. One thing I noted: Where a decade ago my recollection is that 60% or more of 401(k) money (I think more, actually) was invested in safe fixed-income stuff, now that’s down to under 30%. In other words, people have been getting the message that for really long-term money, and that’s what retirement money is, the stock market is the place to be. Over really long periods, stocks always outperform safer investments (barring periods like 1917 in Russia or 1949 in China).
The paradox, or at least the nagging worry, is that it is this very huge shift of 401(k) funds into stocks that has helped fuel the bull market, and it’s a shift that must at least be nearing, if it hasn’t reached, its extreme. (The theoretical extreme would be 100%, but I doubt we’d ever get all the passengers on the boat over to starboard.) So what happens if people begin shifting some of their money back out of stocks?
One mitigating factor is that new money is being poured into 401(k)s with every new paycheck. And some of it, doubtless, will always go into stocks, even if not at the same rate as today. So even as some people may be shifting 401(k) money out of stocks (passengers shifting back to the port side), at least some of that money will be replaced from the flow of new 401(k) contributions.
Well, this Web site offers a glimpse of how some employees have deployed their retirement money and how they’re allocating new sums every month.
(I assume you know the original of the word posh – it comes from Port Out, Starboard Home, which apparently afforded the best views or breezes or something to the wealthiest passengers, and was thus requested when booking passage. Now one of you will have to tell me whether this would have been the British or American passengers, since to the other group, soph would have been the desired booking. The point is: Where we collectively choose to stand on the financial ship affects the way it leans.)
Quote of the Day
In 1800, 75% of [an American's] working man's expenditures went for food alone. By 1850, that had dropped to 50%. Today it is a little more than 11%.~The Wall Street Journal, September 20, 1996
Request email delivery
- Oct 20:
Melvin Reddick / Andrew Sullivan / Richard Painter
- Oct 19:
- Oct 18:
Gregg Popovich: Teaching Software To Write Software
- Oct 17:
Hurtling Toward The Future
- Oct 16:
He’s Baaaaaack . . .
- Oct 13:
Mikey’s Last Breakfast
- Oct 12:
- Oct 11:
Why Corporate Tax Cuts Won’t Create Jobs
- Oct 10:
A Letter From Secretary Albright
- Oct 9:
- Oct 20: