A 401(k), the greatest thing since shredded cheese.
401(k) definition: blah blah blah savings blah retirement blah blah investing blah the right thing to do.
So what is the deal with the 401(k)? Why are we all forced fed that it is a good thing?
Do you realize that the majority of workers in the USA have a 401(k)?
Did you know that the majority of American workers aren't rich?
A 401(k) is just a subsection of the Internal Revenue Code, operated by the IRS. We all know that companies offer it. "It is good", we get matching contributions and we will be fine. Do you realize that none of this investing is really in your control?
Some companies allow you some leash with what you can invest in, but most people don't know anything about investing to begin with so that is virtually non-exsistant. So what are you really doing when you invest in a 401(k)?
If you get a company match, say 4%, and you invest 4% then you instantly get a 100% return on investment, which is great! At this point, it is a no-brainer. What are you investing in? Stocks and bonds. They are commonly packaged in something called "mutual funds" which is just a company that manages a pool of people's money within the stock/bond markets.
I'll cut to the chase. With a 401(k), you only make money when the market goes UP. Ask yourself a question... Does the stock market always go up forever? Cough 1999, cough 2008.
So you are making 100% gains initially with your company match. You are putting it in a position to only make money when the markets go HIGHER. What happens to your 100% gains when the market tanks? Oh, haha you think the markets will never tank.. Cough 1999, cough 2008, cough 1929. They will. It is rehearsed and done on purpose.
All of the middle class puts their money in a situation where they can only make money if the markets go UP. That means only a few will make money when the markets go DOWN.
It is a transfer of wealth from the middle class to the rich. Actually, it is from the middle class to the people who know the truth.
You can actually make more money, faster when the stock market goes down rather than when it goes up. I know that this is hard to believe but it is true. Have you seen the movie called "The big short"? It's called shorting the market.
Don't know how to short the market? First, open a brokerage account (Fidelity, TD Ameritrade, Etrade) whatever. To short the market you have a couple of options. The easiest is to buy an "inverse ETF" in which it goes higher when the underlining asset/index goes lower. Or you can have a margin account where you can just place a "short" order on any asset.
I would recommend the former for beginners.
This is a subject in which many people are in the dark about. Please leave comments below and we can start a dialog on the pros and cons of a 401(k).
they're not the greatest thing but they're necessary due to state debt
They would be amazing if you could position yourself to make money during a crash. They are beneficial for taxes and you get a company match but what is the point of those things if the markets go down 40% suddenly.
It's called a "forced retirement" and in the long run, it works. Ahem, every other year that you didn't mention in your post.
Can you make money shorting the market? Of course! Does everyone have time to actively pay attention to which areas of the market to short at what point in time? No.
That's why people (middle class) invest the way that they do. It makes sense based on ROI and amount of effort, and knowledge, required to enter the space.
It worked historically, but what about the last crash in 2008-2009? Did the middle class really recover to pre-2008 levels? People lost their house, savings accounts, and jobs. They went into debt and the past 8 years people have been recouping but before they get back to where they were, another crash might happen. So, I'm talking about modern day investing. Not historical norms.
Its sad they lie thoso commercials alall time telling people silver is on the rise when its Cryptocoins that are on the rise
Its Cryptocurrency that is on the rise and ICOs