Is this a good time to invest in stock market?

[sr82]

Hello,

I am a little confused about how to react to the current market situation. I am a 26 year old, and started investing in a 401K this year. I chose ultra aggressive investment options for my 401K money and it was doing well until about a month ago when the market went topsy turvy. I am earning close to -20% on the year now, which translate to about a $2K loss.

However, I am not too disheartened because (a) the $ amount loss isn't too much and (b) I am not near retirement age so can afford to ride out the storm.

What I want to know is, should I increase my 401K contributions? I am not maxing out right now, and put the remainder of my monthly savings in an HSBC savings account earning 3.25%. Since stock prices are down, does it make sense right now to put more in my 401K so that I can buy shares at lower prices and when the market bounces back, benefit from the surge in prices?

Also, I have basic knowledge of the stock market; is now a good time to open an online trading account buy stocks or invest in funds? I am thinking the same logic of buy cheap/earn high return when market is up will work in this case as well.

I would love to hear if, and how, any of you are taking advantage of the current market situation.

Thanks in advance for your replies.

[InstaMotivation]

The proper to invest is to make regular investments so you're dollar cost averaging in over the long term. If you want to increase your contributions now, be sure to keep them at the same rate for at least a few years.

Take a look at the stock market index charts over the past 1-3 years... then zoom out and look at it over the past 40 years (what your length of investment will be until retirement).

Try not to follow the stock markets from day to day, it can be stressful. As long as you're making regular contributions and you're in it for the long term, you will do just fine!

[financepro]

Originally Posted by sr82

What I want to know is, should I increase my 401K contributions?

If you are comfortable, then you can increase the contribution.
It is always good to contribute as much as you can.

[gt0163c]

There's all sorts of factors that should come into play in determining retirment contributions, investments, savings, etc. And, the thing is, there's rarely one *right* answer. Generally there's a lot of good things that you can do, some bad things you can do and, unless you have a working time machine or accurate crystal ball, you can't know for certain that you're doing the right thing now to benefit you in the future.

That said, there are a few things that just about everyone agrees you should do.

1. Have enough money in liquid (can get at it RIGHT NOW) savings to sustain you through 3-6 months of expenses. This is your emergency fund and shouldn't be touched unless it's an emergency.

2. Work to pay off any debt you have. This includes student loans, credit card balances, car payments, mortgages, etc. Although, due to the tax benefit of mortgages, some will argue about this one. But, I still think it's a good idea to be on a plan that allows you to pay at least a little extra principal each year.

3. If your employer matches 401K contributions, contribute at least the amount that gets you as much matched as you can. Your employer is giving you free money in this case. There's little reason to turn this down.

4. Open an IRA and fully fund that. Whether you go Roth or traditional depends on your situation, but put as much as you can (up to the maximum contribution limits) into that.

These are the basic things. After these, financial matters get more complicated and depend more on your individual situation, goals, life stage, etc. In general, saving and investing is a good thing. As for how much to save, where to invest and all of that, there's a bunch of people who say they have all the answers. They're wrong. There's also a bunch of people who have good advice. They're more likely to be right. But, ultimate, it comes down to how much are you willing and able to put into learning and then figuring out where you can get the advice that is best for you.

[Buffett Fan]

sr82 - This is not a time to be brave. Warren Buffet says he has been buying but he is a billionaire and can lose a few million and not notice it. Also, he was buying when the DOW was at 8200 and stopped when it started going back up last week. Today (Wed.) the DOW slumped again and it will probably be down again tomorrow/ Like one guy said today on CNCB "it is better to be out of the market wishing you were in, than in the market wishing you were out".
When the markets decide they want to go down there is very little anyone can do to stop them, look at the prices of the mining companies, they have slumped by around 70% in a few months.
Personally I would wait until it is clear that the markets have stabilized and turned around. Markets that are falling sometimes go up for a couple of days but it is when they go up for 4 or more days that it may be time to think they have stopped falling.

[Gootsy]

If I were you I'd boost my contribution amount to the max. Dollar cost average of course.

That's basically what I'm doing. I've decided to double my monthly investment contributions, and adding less money to my savings fund. I could put even more into investment, but I figure it wouldn't hurt to have some cash sitting around incase the stocks REALLY go down the pooper. Then I'd take that extra savings and invest most of it for retirement. If the stocks don't tank much further, then I'll keep that money for emergency or potential downpayment for a house/condo.

I do expect things will get worse over the next few months and into 2009(maybe later?!), but nobody really knows what's going to happen, and DCA into a market that's as fragile as this one sounds good to me.