As I'm typing this post, the Dow Jones Industrial Average is dipping right under 8500, a scary sight for any red-blooded American. Lately I've been thinking about how to talk about this without sounding like a parent scolding her children for not listening, so if that's how this comes across, I apologize.
It's just... PEOPLE. Selling everything in your 401(k) because of market insecurity is insane. IN-SANE. It's crazy for two reasons:
1) What you're doing? It's the opposite of the most basic, fundamental stock market rule. You're supposed to BUY LOW and SELL HIGH. Not freak out and sell low.
2) You'll never make your money back.
I mean it. If you take your money out of the stock market right now and then wait until it starts to go back up again before reinvesting, you WILL NOT MAKE YOUR MONEY BACK. I don't know how much clearer I can be.
Attempting to time the market is both reckless and IMPOSSIBLE. It can't be done.
Because you're going to miss the upswing. After most major stock market crashes, there are a handful of days when record returns are achieved and if you're not IN the market on those key days because you're worried about short-term losses, you'll never see those gains in your portfolio.
Fidelity (one of my favorite money managers) has this great tool that you can play with that will illustrate exactly what I'm talking about.
I'm not attempting to tell you what to do with your portfolio, but I am going to blame this entire stock market catastrophe on LACK OF PROPER FINANCIAL EDUCATION. If more people had chosen to properly diversify their assets using the basic tenants of asset allocation, this fear wouldn't be causing such a huge sell off.