I’ve had a few people in my life tell me that they lost X % of their 401k during the (insert financial crisis).

Recently when a friend told me they lost 50% of their 401k in the 2008 time, I said: “Well you didn’t really lose anything, because you still had the stocks, and even though they were worth less, you still had the same number of stocks, so you could have waited it out?”

To which my friend replied: “That would be true if the person managing my 401k didn’t sell”.

I hadn’t actually thought about that. I mean personally most of my funds are in age based target funds, but those funds are also managed by someone, right? So is there a way to prevent someone from selling your stocks if the economy tanks? I have a pretty long retirement horizon (still in my 30s) so I can weather the storm for a bit.

Edit: Thank you everyone for the insightful answers. This really helps to clear things up

  • givesomefucks@lemmy.world
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    11 months ago

    If it’s a “personal” one it does whatever you or the person you pay to manage it wants it to do.

    A lot of it is by “shares” for company/government 401ks though.

    Depending on the economy one share might be worth $20 or $200.

    Some people in multi index funds will try to time it. When the market is bad they switch to the high risk index, knowing the fund rarely sells stock and wait for prices to go up. When their up and don’t think it will last, they put it in the safe but practically no interest indes.

    Most people aren’t good at that.

    “Lifecycle index’s” start high risk when you’re young, and slowly shift to low risk when you get close to your chosen age.

    Because at 30 a crash on your 401k doesn’t matter, if anything it’s when you should max donations. But a recession the year you’re gonna retire means you keep working till your 401k.rebounds.

    • sugar_in_your_tea@sh.itjust.works
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      11 months ago

      Most people aren’t good at that

      Most professional investors aren’t either. Something like 70% of professionally managed funds fail to beat their index over a 10 year period, and the number goes down from there. And these aren’t idiots, they have a lot of education and professional experience, yet they still fail.

      If timing the market worked consistently, everyone would do it. And if everyone did it, that means nobody times the market (stocks go up and down based on supply and demand, not some magic, hidden force). It’s highly unlikely that any individual will consistently win by trying to time the market.