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It’s Time to Recession-Proof Your 401(k)

A financial guru tells us everything you need to know.

Panicking about your 401(k)? You’re not alone. Now that the financial effects of COVID-19 on our livelihoods and portfolios are becoming more clear, a certain amount of anxiety is understandable. Enter financial guru Amanda Holden (better known to her Instagram followers as Dumpster Doggie), who educates women about investing and other money topics, because she believes that the world needs more women with financial power. Over the last two years, she has taught thousands of young women to maximize their wealth via her blog, The Dumpster Dog Blog, and her tactical Instagram account.

Holden recently gave an incredible, tactical talk, which we’ve excerpted below, for the 401(k)-frantic inside our new community. (Note: The presentation was for entertainment purposes only, and did not constitute personal investing advice; if you’d like personal advice, she recommends consulting a certified financial professional.)

The presentation touched on:

  • Recession strategy
  • Bull markets vs. bear markets
  • Interest rates
  • Job loss during an economic downturn
  • Understanding stock market volatility
  • Investing 101: Stocks vs. bonds, mutual funds vs. exchange-traded funds

… and so much more.

On how Holden decided to become a women-first financial educator:

After working in investment management for years and years, I got pretty fed up. Helping rich men get richer didn’t feel like it was my calling. So I turned around to get this information to people that are left out of these conversations, because so often these conversations are reserved for people who already have wealth, which doesn’t make any logical sense. 

On bear vs. bull markets:

Right now we are in a bear market. A bear market is a negative market, specifically defined as when the stock market overall loses 20% or more of its value—so an investment of $100 is now worth $80 or less. A bear market leaves you feeling very vulnerable because it’s a very difficult time, but what you will notice is that what I am not calling a bear market is bad. It really all depends on your vantage point. If you are a new investor and you’re just starting out on your long investment journey, a bear market may actually be good: The highest potential for future returns is when we are presently in a bad market, or a bear market.

“The oldest investing adage in the book is an old Warren Buffet-ism, and it’s to be fearful when others are greedy and greedy when others are fearful.”

— Amanda holden

Now the lowest potential for future returns is when we are presently in a good market. If you’ve had 10 years or maybe more of upward trajectory in the stock market, and everything is growing, we would describe this as a good market, but look at what comes after a good market: A bad market. It’s counterintuitive, but the oldest investing adage in the book is an old Warren Buffet-ism, and it’s to be fearful when others are greedy and greedy when others are fearful.

On predicting when the downturn and upturns will arrive:

It is so difficult to know when the downturns are going to come, how long they’re going to last. In fact, trying to predict one in the future is considered to be nearly impossible, and so therefore the best practice is for us to simply keep investing all of the time, especially during downturns, in order to capture all of the ensuing upside.

On recession-proofing your finances:

As far as getting through a recession, what’s your strategy? Well, your strategy is to have as much cash as possible. And I know that that’s so much easier said than done. And I will give you ideas of how to do this! But really at the end of the day, it boils down to just take care of yourself, right? And if that means not investing right now, if that means pulling out your 401(k) or other retirement contributions because really you feel like you could use that extra cash in the event that you lose your job, then that’s the most important thing. How much cash do you have saved right now? Enough if you couldn’t work for a month, six months, a year, more?

“How much cash do you have saved right now? Enough if you couldn’t work for a month, six months, a year, more?”

– AMANDA HOLDEN

On whether to pull your 401(k) money out or leave it be:

The most important thing for you and your personal economics is getting through this difficult time, right? It is impossible to know when those crazy downturns are going to come. It’s also impossible to know when the upswings will happen. And so historically, the best investing strategy is just to keep your cool and just keep adding money in methodically over time. And then the last thing that I would add to this is to not invest money that you can’t afford to lose because yes, right now, we could maybe see it as an opportunity, but the reality is, this thing could get a whole lot worse before it gets better.

Want to know the ideal mix of stocks and bonds for holding on to your money during the recession? How to shift your investments as you get older? What a dividend is? 

Join our online community to watch the entire presentation, “Freaking Out About Your 401(k)? What to Do and How to Stay Calm.”