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The bumpy road to financial independence. . . .


Monday, January 12, 2009

To invest or not to invest?

After having spent the last fifteen minutes going around the house recycling bits and pieces of mail that I have no need to file, I've just signed into my online 403(b) account to register for e-delivery of all prospectus materials. Every quarter I receive a giant packet of information that I never read---I rarely change my allocation, and lately I've not even looked at my statements. In fact, I haven't checked my balance in over six months.

Although all I wanted to do was indicate e-delivery for all correspondence, it was impossible not to take a quick glance at my statement while on the website. My 403(b) account has decreased a stunning 21% since last quarter (September of 2009) and before that, it lost about 9%!!! That's about a 30% loss over the past six months---I now have less in that account than I've actually put into it!

Now, in December, I raised my monthly contribution from 1% to 15%, something that I had promised myself I would do last spring, when I really ramped up my credit debt repayment plan. Now that the credit cards are finally paid off, I can begin sending money to my 403(b) account again. But should I?

The thought of sending around $450 each month to an account that might just shrink further and further seems pointless. However, when I think about it from a 'sale' point of view (and oh, do I love a sale!) my $450 dollars is probably buying more shares than it would have purchased in January, 2008 (assuming I were contributing as much as I am now). Although scary, I think the best thing to do is to take advantage of these historically low prices on stocks that will (hopefully, fingers crossed!) increase in value exponentially over the next ten to twenty years.

In looking for answers to my conundrum online, I didn't find much that contradicted my own instincts. I did, however, find this gem of a quote from Warren Buffet, one of the wealthiest men on earth:

“Investors should be brave when others are scared and scared when others are brave.”
–Warren Buffett


The Brandless Blog said...


I would only suggest doing it after setting aside your emergency fund and funded most of your retirement accounts and mortgage debts before buying any investment for time being.

Just being conservative.

The Brandless Blog

The Passive Dad said...

It's very tough to be aggressive when others are scared, especially when the media says it will get worse. I personally invest equal amounts each month as this will allow dollar cost averaging. I probably won't market time the bottom, but who can?

Finally Frugal said...

Agreed. And knowing that I'll probably need to scale back my retirement savings in fall of '09 when I drop to less than full time for school, I'd rather get more bang for my buck now, than do nothing! Can't wait until I have no school costs and a more stable salary (it fluctuates a bit now) so I can make a plan and forget about it!

Bret said...

Having been through decades of ups-and-downs in the stock market, I definitely recommend investing now.

The market may still go down in the short-term, but you will get better returns during the recovery periods than at any other time.

The only qualification is to only invest money that you won't need forfive years. If you will need this money before then, pick a guaranteed return, like a money market or CD.

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