My 401(k) Is Losing Money and I Don’t Care

I don’t check my 401(k) account very often; mostly, I check it to update my end-of-month personal balance sheet. But when the market is in such turmoil as it is right now, it’s hard to not check it at least once a day.

In the last few months, I’ve lost more than $3,000 but I don’t mind. My 401(k) value change year-to-date is almost -20% and I’m happy. Yes, you read that right – I don’t care that my account has hemorrhaged nearly one-fifth of its value. And unless you plan on retiring tomorrow, you shouldn’t either.

It’s a Long-Term Investment

Unlike my savings or checking accounts, I don’t plan on accessing my 401(k) for about four decades. In that amount of time, there will be wild swings in both directions. But, as long as history holds true, over time its value will continue to increase and hopefully double every decade. That means that even though I’ve lost a decent chunk of my account today, 10 years from now I should see its grow by 100% and completely offset any short-term loss I experience due to the financial market tumble.

So it makes sense that you shouldn’t care about major swings today, but why does that mean you should be happy?

Gobble Up the Bargains

Eventually, the market will start moving back up again. We don’t know how long it will take or how low it will go, but it will climb again. And because we know that, we also know that anything we buy today will grow even faster than the investments we bought when the markets were up.

The last thing you should do is follow the lemmings off the cliff and exit the market now. If anything, you should be buying more than ever to lower your cost basis and take advantage of the bargains out there. My wife and I have played with the idea of increasing my 401(k) withholding to take advantage of the present stock “fire sale,” but I think we’ll probably settle for independently saving and investing any surplus we find at least until our basement construction is complete.

Don’t Try To Time the Market

Since the markets are dropping at a pretty decent clip, it can be tempting to hold off buying until you think the markets have bottomed out. The problem is, you usually don’t know until much later where the true bottom was and it could rebound before you have the chance to lock in your purchase. Instead, you should buy all the way down (and back up again) and let dollar cost averaging lower your exposure to losses and to help you make the most of your gains.

Stop watching the markets and reading the financial news. None of that matters when you’re looking at a far-off time horizon. Instead, focus on building your wealth by taking advantage of the opportunity this bear market is offering you.

Here’s what some other bloggers think about what to do with your 401(k):

• 401k is losing money – crash and burn
• My 401(k) Is Losing Money, What To Do?
• Changing Your 401(k) in a Treacherous Market
• My 401K Is Losing Money, What Should I Do?