Stocks Slide: Good News For Your 401(k)
"S&P 500 Turns Negative for the Year" was the headline last night and this morning. Instead of getting depressed about this fact, I want to remind investors, especially those who are still contributing to 401 (k) plans (and other periodic investing plans), that this is GOOD news!
Why? Because through the magic of that payroll deduction or automatic investment from your bank account, you are finally buying LOW. Who among us would be so brave to pile into the volatile stock market right now? Its pretty scary out there and for that reason, I am delighted to see stocks retreat 6.4 percent from the 32-month February highs, so we can all purchase shares at lower levels.
That said, if you are no longer in the contribution/accumulation phase of your financial life, these market drops can be rough. Yesterday, the S&P 500 and NASDAQ Composite did in fact venture into negative territory for the year, as fears over Japan's nuclear crisis sent investors to the sidelines. The S&P 500 dropped to 1256, one point lower than where the index started the year--the first time the index has gone negative in 2011. Important note: this is the index level, which does not include dividends. Including dividends, the index is still positive on the year! The NASDAQ is now down 1.3 percent for the year.
My pal and MoneyWatch blogger Allan Roth loves to remind me that our obsession with the S&P 500 or Dow Jones Industrial Average is silly. He prefers the WIlshire 5000, which as of last night's close, was up 0.29 percent for the year, including dividends. (For more on the difference among various US stock indexes, see Allan's excellent blog here.)
There should also be some solace for those who are not contributing currently: hopefully you have a diversified portfolio that can weather storms like the sort we are currently navigating. For the rest of those who are still dutifully plowing money into our various investment plans, consider the recent slide the Luck of the Irish for your portfolios!
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