How to handle the crisis in your 401K. Don't look. Seriously, don't look.I respectively disagree. I think you should look. When you look, ask yourself the following questions:
- How did this happen?
- What can be done to prevent your 401K from losing anymore value and help it regain value as quickly as possible?
- What can be done to prevent it from happening in the future?
How did this happen? Ever since the last depression, the Democratic party has believed that interventions into the free market produce positive gains for society. The Republican party has believed that the Democratic party was wrong, but has not forcefully fought for its own political philosophy. The Republican party accepted political defeat and compromise rather than fighting for victory because they rationalized that society could bear the small costs that defeat and compromise entailed.
However, the crisis shows that both parties were wrong. Past minor interventions into the free market has produced a major cost and risk to the wealth of society and its citizens. Additionally, the government is currently limited in its ability to respond to this crisis because it allowed much of its wealth to be inefficiently spent by lavishly subsidizing non productive members of society.
What can be done to prevent your 401K from losing anymore value and help it regain value as quickly as possible? In the next election, vote for politicians who advocate a free market governing philosophy. Hope that they adhere to the governing philosophy of purging inefficient regulations and cutting taxes and spending.
What can be done to prevent it from happening in the future? Continue to support politicians and political parties that advocate a free market governing philosophy. Additionally, become immune to those who would use your compassion against you. Are these individuals showing compassion towards you by arguing that you should willingly forsake your own wealth for the benefit of those who in many cases do not need the assistance of the government?
Finally, Megan McArdle says
...selling into a massive liquidity crisis is a pretty bad idea. Selling in a panic because your assets just dropped 30% is almost certainly a bad idea.That is only a good suggestion if the market has already hit the bottom, or is very near the bottom. I am not certain how close we are to the bottom, but I am convinced that if the Democrats gain more political control, and do not get religion on free markets, the market can almost certainly go lower.