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Turbo charge your 401K.

Updated on October 26, 2015

Make your 401K work as hard as you do!

Too few people make the most of their 401K. If you start in your youth and follow a good investment strategy you will have financial abundance when you are older.

This article shows how to significantly outperform the major stock market indices with your 401K. In general 401K plans do not allow withdrawal from a mutual fund unless it has been in the fund in excess of three months. Following the plan outlined here trading will not occur sooner than three months.

Even when you are timing the markets and overweighing sectors you still need to maintain a reasonable asset allocation. Do not put all of your eggs in one basket.

The 2011 portfolio has some great ideas for mutual funds.

Reap the rewards!

Making your 401K work will build more wealth.
Making your 401K work will build more wealth.

Time the markets.

There are a lot of experts that will tell you how to time the markets. It is very difficult to time the markets. I wish someone would have told me to get out of the market on March 10, 2000 when the NASDAQ was above 5000, and on October 31, 2007 when the NASDAQ was above 2850. I wish I would have known to put all of my money back in on March 11, 2003 when the NASDAQ closed at 1272 and again on March 9, 2009 when it closed at 1269. I would be very rich but unless you have some kind of crystal ball you will not be able to time the market that well.

That said there are some things you can do to time the market to make your nest egg grow faster.

When the market is at or near 52 week lows invest all of your new money (that’s money coming into your 401K from your pay check) into the market. Put a portion of your fixed income into the market.

During the times you hear people complaining that the stock market is a poor place to invest then that is the time to invest more of your money in the market. I remember hearing these type of conversations in 1974, 1990, 2002 and 2003, and I hear them in 2008-2009. I cannot speak for the future but in the past the mentioned dates proved to be true money making opportunities.

When the market is at multi year highs decrease the amount of new money you are putting into stock funds and increase the amount of new money into fixed income. Move some of the money out of stock funds and into fixed income.

When the market is down and the economy is soft put a greater percentage of your money in small cap funds. After the market has been recovering for a year or so slowly migrate the money from small cap to large cap. When the market seems really low I invest no new money in large cap and most of it in small cap. As the market recovers I begin to put new money into large cap. Small cap stocks have a history of doing very well during recovery.

Too many people see the market go down and decide to sell. you should do just the opposite. Chicken was on sale last week people bought chicken!!!! You should think the same way about the market!

Just to prove my point the Royce low price stock fund symbol RYLPX (one of my favorite small cap funds) doubled in value from March 9, 2009 to October 19, 2009. During that same time the NASDAQ 100 power shares which is a fund made up of the largest 100 companies in the NASDAQ was up about 67%.Solid mutual fund selection are the keys to great returns on your investment. By choosing your investments wisely you can significantly increase your returns.

I do not recommend doing much with your international portion. It is very hard for US citizens to make changes to our portfolio with regard to overseas investments.

Even when you dollar cost average ( put money in a little at a time such as when you are putting money in your 401K) you are buying more when the markets are down.

As an example today is May 6, 2013. The NASDAQ is trading near 3400 a 13 year high. Today would be a great time to sell.


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