Here's what smart investors do with their 401(k)s when the stock market is hitting highs

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When is the best time to plan for a stock sell-off? When the indices are hitting new highs, of course.

All of that proves that stock sell-offs usually provide a golden opportunity to heap more holdings onto your plate at lower prices. By the way, the cumulative total return from Jan. 1, 1987, through the end of last year was 3,415%.If you, like me, believe stocks are still in a long-term bull market, then meaningful downturns provide a happy opportunity to look at our 401 contributions and allocations with new eyes.

You should also rebalance holdings that have appreciated far above the initial target you selected. Outperformance is good. But you don’t want the market making your asset allocation decisions for you. If you determined to place 50% of your 401 in a particular fund, allow it to run, but if it gets to be more than 10%-15% above your initial allocation, trim it back and transfer the money to a fund that offers fresh diversification or may have lagged recently.

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Source: CNBC - 🏆 12. / 72 Read more »