Vehicle fuel prices are high and moving higher... this impacts the cost of everything. Any investment changes in order?

Vehicle fuel prices are high and moving higher... this impacts the cost of everything. Any investment changes in order? I will tell you what I did... after losing over $30k this year in my 401K stock market indexed fund (I am a bit slow to repond) I moved everything into no-risk Gov't securities for the time being.

You know... with gasoline prices at around $4/gallon and disel fuel even higher everything that is moved by vehicles burning fossil fuel will go to a new high price. That is EVERTHING folks... everything in your home... including the home itself (building materials, etc) are shipped in and this takes fuel. Other markets that track the cost of fuel like Electrical generation in the US will go up.

I am seeing electrical companies petition regulators for increases as much as 29% in some areas. Most electricity in the US is generated from coal and natural gas and these things are going higher too. I don't want to be a pessimist but things do not look so rosey--especially for people already living on the edge.

What kinds of moves/trades, etc have you made recently? Asked by JayD 42 months ago Similar questions: Vehicle fuel prices high moving higher impacts cost investment order Business > Financial Planning.

Similar questions: Vehicle fuel prices high moving higher impacts cost investment order.

No investment changes in order, but additions to your portfolio are. And, get back in that index fund. Your investment risk profile should determine the moves you make in your 401k.

You should have filled one out before you started investing. This profile shows how much risk you can tolerate and allocates your portfolio accordingly. The last thing you wanted to do was get out of the index fund.

First of all, I don’t recommend doing direct equity investing in a 401K. I have all my principal in fixed accounts in the 401k and then I move the interest to the equity side. This way, when the market turns down, my principal is protected and only the invested interest is at risk.By moving the interest each month, I am in fact dollar cost averaging.

While DCA does not give the best return,(that’s why its called averaging because it gives average results) it is a very safe way to invest money. DCA is an investment strategy designed to reduce volatility in which securities, typically mutual funds, are purchased in fixed dollar amounts at regular intervals, regardless of what direction the market is moving. Plus, I only contribute to my 401K up to the company match.

Too many people max out funding the 401k only to find later they need to take a loan, (if their 401K allows it)because they have a money emergency and have no liquid capital. That’s why there are so many 401K loans today. I do most of my large equity investment outside the 401K because, when you take money from a qualified plan, all money is taxed at ordinary income rates.

When you sell shares outside a 401K or IRA you are taxed at a capital gains rate. And the capital gains rate is less than the ordinary income tax rates.401k’s are not always what they are advertised to be.As a Certified Financial Planner, this is one of the most difficult areas to get people to understand. The most important thing to remember about qualified plans is they are really income deferred, not tax deferred.

Yes, you pay no taxes during the accumulation phase, but the withdrawals are taxed at the current income tax rate, not the tax rate you were at when you put the money in. For example, I have clients who started IRA’s back in the 70’s. They were just starting out and incomes were low.

They were in 10 to 15% tax brackets when they put the money in. Now they are forced to make withdrawals (MDR) putting them in the 20 to 30% bracket. They are being taxed more now on their withdrawals then they were able to tax deduct originally.

And, if you have a large balance, the situation is even worse, because the amount the government forces you to take based on a table called required minimum distributions.It forces you to make a withdrawal of a certain amount whether you need the money or not. For example, if you had $1,500,000 in a 401K the minimum withdrawal is $54,745. This amount also makes 85% of your Social Security benefit subject to tax.So you can see how quickly your total income adds up.

This takes the control away from you in trying to reduce taxes in retirement. I always tell my clients, it’s not who has the largest accumulated balance, it’s who has the most net spendable amount. Another example of you being in control.

Secondly, you can not write a stock loss off you taxes in a 401k, but you can outside the 401K. This is another example of keeping you in control of when you sell shares and how much tax you pay. Thirdly, you need to remember that investing in the stock market, even inside a 401K is a buy and hold strategy for the long haul.

The only reason to reposition assets inside the 401K is if you are over 55. At that age you fixed account dollars should be about 60% of your portfolio and the equity side about 40%. These percentages are different for everyone depending on how much you have invested in total.

A person with a very large fixed position can afford to have more at risk than a person with a smaller fixed position. But as you get older, you have less time to recoup the loss. Right now, for example, if you had $100,000 in your 401K earning an average of 6%and lost $30,000 you will need the remaining $70,000 to earn 8% over the next 18 years to catch back up.

Since you have now moved everything out of the market, you could miss a great upside potential. I know it is difficult to hold on while you are watching your account get smaller, but if you had the correct asset allocation, you would have been able to hang in there. I have been in the market since 1970 on a buy and hold formula and my portfolio as averaged 10.91%.

I don’t know if you are aware but from 1970 to 1975 the market averaged 1.56%. In 1974 the market returned -27.94%. Would you have bailed out?

If so, in 1975 the market returned 37.36%. That is why you need to stay the course. I agree with you that we are in a very different, not difficult situation now.

Can you imagine someone sitting down with a planner 30 years ago trying to do retirement planning. Could the planner have predicted $4.00 a gallon gasoline, cell phones, HDTV cable bills, TIVO, cars that cost more today than his house did 30 years ago. That is why so many people fail at retirement planning.

They set an income goal 30 years ago with no idea what things would cost today, except for the inflation built into the plan. But, I feel things are not that bad. More expensive in some areas, but not that bad.

For example you can buy a good laptop today for $500.00. In 1980 there were no laptops and in the early 90’s that laptop would have cost $3,000 or more. During the last 40 years, every long distance call you made on you home phone, (not cell phone) was at first operated assisted and later charged by the minute.

Now I have long distance phone service in my house and can talk to anyone in the United States for as long as I want for a flat rate of $40 a month. Yes prices are up, but so is income. When I started work in 1970, just out of college, I made $150/wk.

My car payment was $50 a month and my rent was $200 a month. I thought $200/month was a fortune. Some things are more expensive because of planned obsolesce,companies manufacture things that over time need to be replaced because they wear out.

There is technological change, cell phones, ipods, blue ray dvd, for example, and inflation. It is just we have been spoiled by low energy prices for so long, that the increase now seems like the end of the world. What we are experiencing now is something called stagflation; rapidly rising inflation combined with recession — in the U.S. economy.

Manufacturing activity and overall economic growth in the U.S. will continue to expand at an anemic rate throughout the remainder of this year. Meanwhile, inflation continues to increase caused by rising energy prices. This is what you are talking about in your question.

Growth companies tend to struggle during times of Stagflation because they rely of fast expanding economies and outside financing to grow sales. A number of these are undervalued now and would made good additions to a portfolio. There are some good books that I recommend my clients read.

John C. Bogle, "The Battle for the Soul of Capitalism" and "Common Sense on Mutual Funds." Ed Slott, "The Retirement Savings Time Bomb.

" These books do not pick funds, but explain how the financial systems work and how to protect yourself. I hope this helps give you some direction.It is impossible in this short space to explain all the ins and outs of saving and planning for retirement. Sources: Stagflation Warning — Time to be a Value Player http://moneynews.newsmax.com/david_frazier/stagflation/2008/06/17/105164.html?s=al&promo_code=6472-1 .

Having your money in cash at a time like this is very brave. You are counting on Inflation not eating away at your principle and interest. That is not a very safe bet given how things are.

I am looking at companies that supply stuff. Gold mines, silver mines, copper mines, oil drilling companies, Oil and Gas trusts, REITs, so on. The best protection against inflation is STUFF and the companies that make that stuff..

While I agree it looks bad now, I reccomend against moving out of a diversified fund. It was much worse in Clinton's last year and then the year after 9/11. And it was bad in the last year of Bush #1s term too.

The stock market performs over 20 years not a couple years. I reccomend staying on Growth Mutuals, mid cap, large Cap and small cap and and overseas fund of some sort. Wjatever you do, don't put it all in one place Sources: My answer .

1 Forget the fuel prices! What are you doing pulling your money out of the index fund? I'm only going by the picture in your avatar, but you don't look like you are going to retire in the next 10 years, right?

Do you not think the market is going to turn around in that time frame, if not sooner? And if you have a longer window before retirement, you have more time to make up the losses. Dollar cost averaging means that you would be buying shares of the Index Funds when prices are low, so when they go up, you win!

Then again, maybe you are 64 years old and just take really young-looking pictures...:) .

Forget the fuel prices! What are you doing pulling your money out of the index fund? I'm only going by the picture in your avatar, but you don't look like you are going to retire in the next 10 years, right?

Do you not think the market is going to turn around in that time frame, if not sooner? And if you have a longer window before retirement, you have more time to make up the losses. Dollar cost averaging means that you would be buying shares of the Index Funds when prices are low, so when they go up, you win!

Then again, maybe you are 64 years old and just take really young-looking pictures...:).

2 Yeah, JayD, that's a little slow. Since you were in an indexed fund, you're counting on the long-term trend to give you a better return than CD or T-bills. And with the current market turmoil, standing aside while the index funds sink is a good alternative.

Problem will be to know when to get back in. I left mutual funds in 2001 after seeing a similar drop. I've spent the last seven years educating myself on markets and investment vehicles.Do the same if you have the patience for it.

Investor's Business Daily is a great source (investors.com/). Books by Robert Kiyosaki are also good, bur really general. I like the information available online from changewave.com/.

Changewave has a newsletter called Sam Collins' Daily Trader's Alert that I think is free. It'll help you identify when the market starts going back up. Good luck!

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Yeah, JayD, that's a little slow. Since you were in an indexed fund, you're counting on the long-term trend to give you a better return than CD or T-bills. And with the current market turmoil, standing aside while the index funds sink is a good alternative.

Problem will be to know when to get back in. I left mutual funds in 2001 after seeing a similar drop. I've spent the last seven years educating myself on markets and investment vehicles.Do the same if you have the patience for it.

Investor's Business Daily is a great source (investors.com/). Books by Robert Kiyosaki are also good, bur really general. I like the information available online from changewave.com/.

Changewave has a newsletter called Sam Collins' Daily Trader's Alert that I think is free. It'll help you identify when the market starts going back up. Good luck!

With fuel prices screaming up,do you plan on driving less,or the same,or maybe getting a vehicle that gets better fuel.

I cant really gove you an answer,but what I can give you is a way to a solution, that is you have to find the anglde that you relate to or peaks your interest. A good paper is one that people get drawn into because it reaches them ln some way.As for me WW11 to me, I think of the holocaust and the effect it had on the survivors, their families and those who stood by and did nothing until it was too late.