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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 10163
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My 401k is invested 78% in utx stocks. I have lost a lot

Customer Question

My 401k is invested 78% in utx stocks. I have lost a lot this year. Should I wait for recovery or diversify now.
Submitted: 10 months ago.
Category: Finance
Expert:  Lane replied 10 months ago.

Hi,

...

I wouldn't move away from equities altogether ... in the year prior to elections, historically, (because of the uncertainty regarding policy going forward) markets are almost ALWAYS choppy, sideways or slightly down.

...

However, the economic fundamentals are MUCH stronger than, say, the bubble that was waiting to burst in 2007-2008.

...

We're back to what any economist would call effectively full employment (95%), and, albeit slower than in the 80's or 90's (again the 90's being a contrived growth fueled by unbridled demand for housing by people that, as it turns out, couldn't afford), steady growth.

...

Those who have the strength to stick things out and not go with the herd for THIS year UNTIL the election removes a HUGE amount of uncertainty (regardless of WHO wins) will be pleasantly pleased with their discipline throughout 2017.

...

UTX, HAS been downgraded from a strong buy to a buy (but not even to a hold, and not to a sell by ANY of the buy-side analysts I've seen) so diversifying a bit into OTHER equities is probably (in this still flat period) likely a lateral move (rather than moving to cash or bonds) which might end up locking in a loss and MISSING the correction back up in equities that I think we'll, see by year-end.

...

As Dr Markowitz said, and Eugene Fama and others have underscored ... the best times in the market come perversely, but understandably, just after the worst of times.

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Diversifying SOME of that position into OTHER equities if probably prudent, generally. Moving into cash equivalents or something that essentially means running scared at the lows, I do not recommend.

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In MY 30+ years in the advisory part of my practice, the three most important word I have every uttered are "don't DO that," meaning don't speculate at the highs and run scared at the lows.

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