After the Great Recession ended, I was able to rollover my 401(k) to a Rollover IRA because the company I worked for sold to another company. I didn't transfer any of the mutual funds, but sold everything so I could rollover cash. In a sense, I locked down my cash while I had the opportunity. It was great timing for me because the money I "lost" on paper during the financial collapse had recovered. I looked at the situation as my second chance at investing. Even though I could invest the money in my Rollover IRA any way I wanted, I felt it was best to keep some in a cash position. According to a recent article by AP, it's been five years since the global financial crisis triggered in part by the collapse of Lehman Brothers. An AP analysis of households in the 10 largest economies in the world showed people are hoarding cash and spending less.
Choosing dividend-paying stocks
I have only 30 percent of the money in my Rollover IRA invested in stocks. Most of the stocks I own pay dividends. I like to reinvest the dividends or profit as full or partial shares so I accumulate more shares over time. My former 401(k) plan only offered a limited choice of mutual funds.
Using stop-loss to limit losses
One of the ways I protect myself from a major financial collapse is by putting in stop-loss at a price that is 20 percent below what the equity sold for the prior trading day. When my individual stocks shoot up in value, I often raise my stop-loss to a higher price. Even if the market falls 40 percent, I'll only "lose" 20 percent. And, in some cases I won't really be losing anything at all since I originally purchased my shares much lower, but adjusted my stop-loss price over time.
Investing in gold funds
With my IRA plan, I'm also able to invest in exchange-traded funds (ETFs) and exchange-traded notes (ETNs) that are a variation. Since I don't want to actually own physical gold, I invest in ETFs and ETNs in the metals or gold categories. I personally feel more secure having about 5 percent of my money in a gold fund and another 5 percent in a fund that does well when the market tanks.
Keeping it in cash
A whopping 60 percent of my IRA money is in a money-market or cash position. I do plan to invest more money into the stock market in the future, but am waiting until the market corrects. I'm not bringing any new money into my retirement accounts until I know what the fallout will be after the runaway national debt. According to the AP story, the wealthiest Americans are saving 30 percent of their pay, which is three times the amount they were saving in 2008. If I had any cash leftover at the end of the money this month, I'd save it into an emergency fund. It's difficult to hoard cash when you spend it all on bills and other necessities.
Experts say people experienced psychological scarring during the global financial crisis. They fear losing money. With all of the recent talk about default talk, the debt ceiling, government shutdowns and furloughs, I am relieved my Rollover IRA money is under my control.
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- Financials Industry