Plus you can exacerbate the situation if you are one of those people that actually day trades within your 401k.
Why would you ever want to day trade a mutual fund?
401(k) is the 2nd best option out there after Roth IRA. That’s why the most common advice is contribute in 401k to max out the match amount, then contribute the rest in roth IRA. Once you max that out, then you max out your 401k.
I had roughly $10,000 in my 401k. The market tanked and one of the funds toppled. The value in my 401k went to $5,000…
How’s this any different than investing in the market through any other account type? If you buy back to a similar fund, you still be in a very similar boat compare to if you didn’t have to sell. The tax advantage is you get to invest with the $ that you would have to pay to the government. Lets take your example and compare that to a regular brokerage account?
$10k in 401k, tank 50% and now you need to take it out for retirement. You have $5000, tax free. If you put it in a brokerage account instead, depend on your tax bracket, the $ you have left is anywhere between $10k and a little over $5k. Put that in a fund which also drop 50% and then you have to sell it to use for retirement. You’ll have anywhere between $2500-$5000. So, worse case scenario, 401k = to brokerage account. Best case scenario, you’ll have almost 100% more $.
