Can I contribute to a 401K without buying stocks now?

[Bearded Man]

I allocated 100% of my salary to 401K contributions so that I max it out as early as possible. Only one pay period to go, it will take 3 pay periods. But while I did it as a tax shelter and I'm still way ahead considering what it is saving me in taxes, I would prefer to buy something that isn't tanking like crazy.

I'm already down 4% in a month. Yes in the long term it doesn't matter but buying into a downturn, at the beginning of a down turn is not going to help things along. It is going to keep tanking for a while and I'd prefer to have cash to buy into it later. Right now I'm putting 100% of the money into the Drey S&P 500 Index Fund.

My 401K is with Fidelity but I don't see an option to contribute just cash and let it sit without buying anything or anything that isn't really tanking right now.

[katsiki]

Isn't now the time to BUY?  Stocks are on sale!

[Telecaster]

Yes you can.

[Another Reader]

Do you have a stable value fund or a money market fund? I used the stable value fund to keep cash in a 457 plan in 2007-2011 after I left an employer.  They paid 3 percent interest, much better than I could get at the bank.

[Bearded Man]

Yes on sale but will keep going down for a while. There is no option to pick from for my contributions to not buy anything, I have to pick.

FRTXX is the only fund that is NOT down. Just barely positive. It seems to be very stable over short and long term periods, about .01% returns in years 1-10 etc.. I could buy this and exchange for the S&P 500 fund at a later date?

[Bearded Man]

Do you have a stable value fund or a money market fund? I used the stable value fund to keep cash in a 457 plan in 2007-2011 after I left an employer.  They paid 3 percent interest, much better than I could get at the bank.

Just one fund FRTXX but I don't really know much about it. I'm surprised you can't seem to just contribute and leave it as cash. You can with an IRA. I'd call the guy listed on my companies brochure but he is a useless douche, took months to get a hold of him last time and got nothing out of him.

[mskyle]

FRTXX is a basic money market fund; technically it could go down but it's incredibly unusual. In fact it only happened once before 2008 (for ANY money market fund) and when it did happen to some funds in 2008 the government stepped in. FRTXX is what you want.

[Bearded Man]

FRTXX is a basic money market fund; technically it could go down but it's incredibly unusual. In fact it only happened once before 2008 (for ANY money market fund) and when it did happen to some funds in 2008 the government stepped in. FRTXX is what you want.

Ahhh, grassy ass.

[seattlecyclone]

Yes on sale but will keep going down for a while.

If you have a crystal ball that can predict this, you should definitely be shorting VTI in your taxable account. Are you doing this?

[Another Reader]

When you contribute to a brokerage IRA, the money goes to a core account.  You buy stocks, ETF's and funds with the money in your core account.  The Fido money market account performs the same function in your 401k.  Direct your contributions to that account.  Just exchange the money market fund for whatever fund you want to buy when you believe the time is right.

[Rubic]

Yes on sale but will keep going down for a while.

If you have a crystal ball that can predict this, you should definitely be shorting VTI in your taxable account. Are you doing this?

Agree with seattlecyclone.  In 1979, Warren Buffett wrote a telling piece in Forbes entitled “You pay a very high price in the stock market for a cheery consensus” about the folly of human nature when it comes to investing. Buffett’s point was that many investors seem almost “hard wired” to take actions that are not in their best interests:

"In 1972, when the Dow earned $67.11, or 11% on beginning book value of 607, it closed the year selling at 1,020, and pension managers couldn’t buy stocks fast enough. Purchases of equities in 1972 were 105% of net funds available (i.e., bonds were sold), a record except for the 122% of the even more buoyant prior year. This two-year stampede increased the equity portion of total pension assets from 61% to 74%–an all-time record that coincided nicely with a record-high price for the Dow. The more investment managers paid for stocks, the better they felt about them.

And then the market went into a tailspin in 1973-74. Although the Dow earned $99.04 in 1974, or 14% on beginning book value of 690, it finished the year selling at 616. A bargain? Alas, such bargain prices produced panic rather than purchases; only 21% of net investable funds went into equities that year, a 25-year record low."


BeardedMan:  Avoiding equities when the prices are cheaper is just human nature.  I know several people who are currently "staying out of the market until it's safer to invest."  -- presumably sometime in the next bull cycle.  :-(

[dios.del.sol]

This article has been quoted many times, but is relevant here again:

http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

[wenchsenior]

I realize this isn't to the point of the question (of course you can buy bonds, etc., in a 401k).

But I seriously cannot fathom people wanting to jump OUT of stocks right now unless you need that money in the next 3 or 4 years.  I was forced by circumstances to pull back investment during 2008 and it made me insane with rage. We'd be at least 100K ahead right now if I could have just stayed the course during the drop, let alone INCREASED buying, which was impossible.

But it's possible now!

I just set up a 90/10 s/b ratio index fund Roth and maxed it in the first 2 months. I started a Roth for my husband and set it to dollar cost average. Now I'm about to set up a 90/10 s/b ratio i401k and start pouring every spare dollar in.   

[Jon Bon]

I realize this isn't to the point of the question (of course you can buy bonds, etc., in a 401k).

But I seriously cannot fathom people wanting to jump OUT of stocks right now unless you need that money in the next 3 or 4 years.  I was forced by circumstances to pull back investment during 2008 and it made me insane with rage. We'd be at least 100K ahead right now if I could have just stayed the course during the drop, let alone INCREASED buying, which was impossible.

But it's possible now!

I just set up a 90/10 s/b ratio index fund Roth and maxed it in the first 2 months. I started a Roth for my husband and set it to dollar cost average. Now I'm about to set up a 90/10 s/b ratio i401k and start pouring every spare dollar in.

Yes this!! I am going to push my 401k to 30% until I max is out for the year with a 90/10 ratio.