When should I change my 401K investment strategy from active to passive?
September 24, 2008 1:21 PM Subscribe
Given today's equity market conditions, when should I change my 401K investment strategy from active to passive?
posted by shinybeast to Work & Money (6 answers total) 3 users marked this as a favorite
In my 401K, I'm planning to switch investment styles, moving out of diversified actively managed equity funds to diversified passively managed Vanguard equity, REIT, bond, and TIPS index funds.
The question is, when should I do this, today or when my current fund mix has climbed above the performance of the S&P 500 index? Or, should I wait until the market recovers its YTD losses. I'm using the S&P 500 as a crude performance benchmark. According to Morningstar, my mix of funds is currently underperforming the S&P 500 by 4% YTD and underperforming the funds' respective category benchmarks by 0.25%.
Currently, YTD, the S&P 500 is down 20%.
I can't quite figure out when to make my move. My fear is that if I move money into REIT, bond, and TIPS funds now, I'll lose out if the equity market makes a healthy recovery later.