All About 401(k) Plans

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2. Dollar-cost averaging

There are only two times that the actual value of your 401(k) matters: when you're considering retirement, and when you retire. Until you get to those points, your efforts need to be focused on what you can do to enhance your plan's future value. It almost seems counter-intuitive, but it can be better to increase your contributions to funds that are declining in price, and to decrease your contributions (or move out of) to funds that are rising in value. By doing this, you are in effect buying more shares of the funds that are likely to go up later while they're "on sale," thus increasing the multiplier effect of that later price rise; moving money out of funds that are rising in value can help you preserve the gains you've already gotten, and reduce your exposure to sharp declines. Maximize and preserve gains; avoid or reduce losses. It's the implementation of the classic market strategy: buy low, sell high. Too many people do the opposite.