How to protect your 401K in this market bubble

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CRamer Orman

March 12, 2013 By Steven E. Greer

The stock markets have reached all-time highs despite the fundamentals of the economy still reflecting a recession. The reason for this incongruity is that the Federal Reserve has been indirectly “printing money”, via “Quantitative Easing” (QE), which has created a false perverse “free money” zero-interest-rate environment. Ben Bernanke’s Fed is currently pumping an astounding $85 Billion per month into the markets, inflating the biggest market bubble the world has ever seen.

The second that the minutes of the Fed hint that QE will stop, or some unexpected bond crisis arises, the markets will crash. We saw this briefly last months when the minutes of the Fed caused a week-long sell off.

If you have stocks in your 401K that cannot be sold without a hefty penalty, how can you protect the wealth you have accrued? We asked some money managers at large companies which offer their own mutual funds. The following are some financial instruments that one can transfer into, without penalty, and would not evaporate if the markets crashed:

  • Annuities from insurance companies
  • Cash in the form of money market funds. (The interest is virtually zero but they are a safe haven)
  • Short term maturity bond funds (longer duration exposes one to inflation risks)
  • Real estate funds

A word of caution: your “money manager” at any company that sells their own funds will try to convince you to not “fight the fed”, and that “The market still has legs”. To advise people otherwise and tell customers to not buy stocks would be a death sentence to their business model. This conflict of interest is not well appreciated by most clients of the fund managers.

Another word of caution is that most employees at broker dealers or money management funds have no investment experience are woefully unqualified to be giving financial advice. In the course of writing this story, the level of misguided advice, and flat out incorrect advice, was appalling.

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2 Responses to How to protect your 401K in this market bubble

  1. Ellen Silverman says:

    The Fed has been intimating since last spring that tapering would begin by the fall,which of course didn’t ‘t take place.

    The markets have mostly priced tapering in.

  2. Editor says:

    Do you work on the sell side or in a long-only mutual fund?

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