Tuesday, June 2, 2009

My 401k Contributions Since the Market Crash

Fellow blogger 444 wanted to know how much I contribute to my 401k. She was also curious about my 401k performance excluding my contributions.

To answer 444's first question:

  • October 2008 - Mid-April 2009: I contributed $587.40 and my employer matched $156.65 per paycheck into my 401k, for a total of $744.05/paycheck. (I get paid every other week.)
  • April 24, 2009: For some unknown reason, I contributed $605.03 and my company matched $161.35, for a total of $766.38.
  • May 2009 - Current: I've been contributing $645.36 and my company matches $161.35 per paycheck for a total of $806.71/paycheck.
  • January 2009: In addition to the regular contributions and match, my company deposits a chunk of money into my 401k as part of its "safe harbor" plan. This year, my company deposited $3,008.88.
Therefore, since October of last year, I've contributed (including company match) $15,805.38. In September 2008, my 401k balance was $88,596.01. It's currently $94,676.85 (as of May 31). So if you do the math, my 401k is still -9.31% (exclusive of contributions) since last September. Grrrrr...

On the other hand, my 401k looks like it's doing relatively well. Some months my 401k beats the S&P500 benchmark, and other months it's short. Year-to-date (i.e., from 12/31/08 to 5/31/09), my 401k has increased by 8.11% exclusive of my contributions. In comparison, the S&P500 increased by only 1.76% during the same period.


My Contribution (incl. match)

Month-to-Month % Change in 401k excl. contributions

S&P500 % Change

































As you know, I don't think the current market rally is sustainable. In early 2008, David Rosenberg (Chief Economist of Gluskin, Sheff & Associates) predicted a market crash caused by the credit and housing bust. Additionally, he predicted that the Fed would lower the key interest rate to 1%.

Like me, he believes that there is a current disconnect between the stock market and the economic reality. Mr. Rosenberg doesn't believe this market rally is real unless unemployment numbers improve and consumer spending increases. The current market rally appears to be supported by a technical-analysis, fund-flow by institutional investors who've been sidelined for awhile.

How long can this market rally last? Mr. Rosenberg believes that for this rally to be "real", the 3rd Quarter GDP will need to improve. In other words, we won't know for sure until August or September.

Another problem I see is that there are couple of growing inflationary pressures that will kill consumer spending: weaker dollar = higher commodity (oil) prices and higher long-term Treasury yield = higher interest rates. (A reason why I don't think the housing market will recover any time soon.)

But then again, I may just be Chicken-Little.

Why do I bring this up? The bottom-line is, I have no freakin' clue what the market will bring. I also don't engage in market-timing since (a) I suck at it and (b) I don't have confidence that I can be right twice (i.e., when to take money out of the stock market and when to get back in). My only option really is to dollar-cost average and to reallocate my assets regularly to meet my target allocation.

I often wonder whether I would've been better off not contributing to my 401k at all between 2001-2008 and instead focusing on debt-repayment, a la Dave Ramsey. Assuming I did that, I would've avoided buying into an over-heated stock market and I could've started investing in this down-market. But the fact of the matter is, I didn't become financially responsible until 2007 and hindsight is 20-20. I will never know at any moment in time whether it's a good or bad time to invest in the stock market. That's why although I may be up to my eyeballs in student loans, I continue to contribute to my 401k.

With respect to re-allocating, looks like my 401k is not completely out-of-whack from my target allocations. I may wait until year-end to re-allocate.

Investment Fund (Classification)Current %Target %
DODFX (Int'l Multi-Cap Value)19.29%20%
DODGX (US Large-Cap Value)17.12%18%
BTIIX (S&P500 Index)


NBGEX (Small-Cap Blend)



PTRAX (Intermediate Term Bond)



MLTXX (US Treasury Fund)




444 said...

Wow - thanks for going into all that detail. I hope I didn't cause you to spend too much time, just on my idle curiosity. Unless, like me, maybe you really enjoy going over it with a fine-toothed comb and were glad to have an excuse. :oD

I will look it over more carefully when the day slows down here. I will also answer your margin question soon, so check back in a little while.

Have a great day!! :oD

Ms. MoneyChat said...

what is the world is a safe harbor fund? i want one of those;-).

your 401K IS doing pretty well. kudos chica. like you, i have no idea or interest in trying to time the market. i just do what i think is right, and until i get a new revelation, i stick to my path.