Cash, Are you There? The Market Has Tanked Again.

A couple of months ago, I rolled over a small 401k from a past employer to a new account. The primary reason was to get a little more control over the funds since the old account, overseen by a “full-service” brokerage had not gained a solitary penny for the past 6 years. Any gains absorbed by fees and more fees. Of course, now that I’m my own Administrator, as it were, I have chosen no funds or securities in which to invest. The cash is still sitting there.

I have been very concerned with my foot-dragging especially since the stock market appeared to be improving despite the faltering economy. After all, you have to be in it to win it. Yesterday, the Federal Reserve held interest rates the same after steadily dropping them for the past 9 months. Basically, the economy should continue as it is and the Fed will wait to see if inflation requires them to raise the rates again. This holding-pattern approach seemed to make sense until today when the market dropped 350 points to a new low not seen for almost 2 years. Great!

Why the sudden drop when the news is still the same? The price of Crude Oil continues to rise driving up the cost of everything especially food and energy. Firms that were the backbone of the economy are faltering. Financial firms continue to hemorrhage cash. Governments are still trying to come up with solutions for the mortgage and housing mess. And, the main driver of our economy, consumer spending is still down.

The news was bad today but no worse than other days. Now, I really don't know how I'm supposed to figure out how to invest my 401k cash? All of the market gurus tell us to pick the right allocation for our retirement needs and not to jump around with your picks, buy and hold, set it and forget it, re-balance once a year, don’t try to time the market and so on. I know I have to pick sooner or later, at least the cash is still there, not more but not less either.