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Time to Take Some Profits and Rebalance My 401k Again

By: Steve Johnson

10/7/2009 - 36 Comments

Global markets have rallied in the last six months and it’s time to take some profits.

My 401k is up over 36 percent this year, as are many markets around the world.  But I don’t think the rally is justified, at least not in the U.S. with staggeringly high unemployment and a deepening recession.

The dollar has begun to sink, but global markets still appear to be coupled together.  I think the U.S. stock market could be headed for a crash and soon.  The question is what will happen to the markets in Asia and Europe? 

Global Markets Coupled Together

Will they follow the U.S. market crash like they did last year or will they break there tie to the U.S. market and continue the rally?  I don’t think they will at this time.  I think it will take another global stock market crash before foreign markets finally become unglued from the U.S. markets – and the sinking dollar will be the catalyst that causes international investors to pull out of U.S. markets.

In light of my market analysis, I have decided to rebalance my 401k and move my 36% increase in profits into a safer place before the crash.  If the rally continues, I will miss out. But if the markets crash, I will have preserved my wealth and will be in a great position to get back into the market at the bottom again.

If the markets stagnate for the remaining of the year, then I have not gained or lost anything.  This is also a very likely scenario.

If you recall the last time I rebalanced my 401k at the beginning of the year, I chose two sources from my 401k options; natural resources (oil, gold, other commodities) and International markets.  Both have done very well as has the entire global market.  I just want to keep my gains and I’m skeptical of the lack of corporate earnings to support the current rally.

Therefore, before the disappointing end of the year results drive the markets into a tailspin, I’m getting out.  As of today, I’m rebalancing my 401k into two new options; a money market fund (basically cash) and a utilities fund (which has not seen much growth this year).

The money market fund is risky if the dollar sinks, which I’m convinced it eventually will, but if the markets crash again the dollar will enjoy a flight to safety like it did when the market crashed at the end of 2008.

If the market doesn’t crash by the end of the year, I will reconsider my options.  But for now I’m happen with my 36 percent gain for the year and I’m willing to risk losing out of the small chance that the markets will gain any more the rest of the year.

Correction: By the time the transfer of my funds was completed, my yearly gain was over 40 percent.


I am not a licensed financial advisor, so please consult a licensed professional before making any investment or financial decision. 

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