If you're worried about your 401(k), you have a lot of company. Our Start Investing community has a thread titled "Are you getting enough from your 401(k)?" It has attracted roughly 50 times more interest than any other discussion on that message board.
Many of the posts are along the lines of this one from a member called "Truns": "Sure, I'm worried. Should I wait it out?"
Short answer: Yes. The long answer follows.
A great many posts convey the alarm and frustration of folks who are scared to death by something they don't understand. Believe me, once you understand investing, it isn't that scary.
"Phil5185," one contributor who knows the subject inside out, wryly notes, "Stocks seem to be the only thing that people hate to buy on sale."
In the testimony of participants on this thread, I've discovered five of the biggest mistakes a 401(k) investor can make. Postings are anonymous (except mine), so I don't think I'll embarrass anyone by sharing these errors with you.
Avoiding them can make you rich. Phil says he participated in his plan for less than 20 years and never got a company match, yet he managed to amass $1 million. "Young people with 30 or 40 years will have some awesome 401(k)s," he says.
Mistake No. 1: Selling when it's time to buy
A 27-year-old identified as "Lucky4jar" complains, "I have been putting more and more money in every two weeks only to watch my total go down and down." His solution: "I have since lowered my contribution rate from 15% to 3%, enough to still get the company match."
It was this post that attracted Phil's retort about stocks being on sale. A bear market is not the worst time to buy stocks; it's the best time. Markets lurch between periods of excessive optimism (the bull phase) and mind-numbing dread (the bear phase). The latter periods correct the excesses of the former, but then they, too, go to extremes.
Over a lifetime of investing, you'll go through a dozen of these cycles, and you'll discover the bear phase is when you make your real money, because that's when you pay the least for the best stuff.
Every month my wife and I make contributions to our brokerage and retirement accounts, and except for a portion of our emergency savings, 100% of that goes into stock mutual funds and exchange-traded funds -- and mostly the risky stuff, such as small-capitalization, midcap and emerging-market funds.