Here’s what works for me. I hope it helps a bit…
(1) I would say No — don’t time the market unless you have a well-thought-out plan on when to get out, when to get back in, how much to buy & sell, and you’ve tested it on the last several bear markets.
(1b) If you contribute to your 401K every month, then when the market is down you’re buying more shares for your money, a smart move.
(2) I stick with an S&P 500 index fund. Yes, at any point in time there will always be something that’s beating it: bonds or gold or oil, smallcap, foreign, etc., but the S&P 500’s very-long-term growth rate is a solid ~10%, and sticking with the S&P 500 means (a) you won’t have to worry about what to switch into & when to do it (b) the news will always let you know how you’re doing (c) fees will be rock-bottom so you’ll keep more (see 6, below re: fees).
(2b) S&P 500 — Warren Buffet has instructed his executors to keep his wife’s portfolio 90% S&P 500 and 10% short-term bonds — he’s said it’ll beat most investment managers. Buffet: “My advice to the trustee couldn’t be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (Buffet suggests Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”
(3) ALWAYS grab any employer 401K match — if they match 3% or 6% — take it ALL — it’s an IMMEDIATE 100% return!! Literally Free Money. An absolute no-brainer.
(3b) Start early in your career with the goal of raising your 401K contribution as much as you can as soon as you can. For 2022, you can do $20,500 max. Workers who are 50 and older can make an additional $6,500 in catch-up contributions. Employer match adds to that. Do the math with XL, one row per year of your career, assume a simple annual return of 8% or 9%, and you’ll see that starting as early & as large as possible makes a really BIG difference in ending values.
(4) Do Roths if you think tax rates will be higher in the future (I think so).
(5) If you’re very close to retirement or in retirement then keep a couple/three years needed withdrawals in short-term investments like cash, CDs, short-term bonds — with this short-term money on hand you won’t have to sell cheap at the bottom of a bear market to meet your expenses. There are numerous plans for how to replenish cash — see James Cloonan’s “Investing at Level 3” book for one way to do it (brief recap at bottom).
(6) Fees matter. A 1% fee for 20 years = 0.99^20 = 82% so -18% lost to fees. A 0.05% fee (like several S&P 500 funds & ETFs) for 20 years = 0.9995^20 = 99% so only -1% lost to fees — BIG difference. Watch out for custodian fees, too — that’s the fee charged by your 401K manager, the folks who send you your statements — if you think their fees are high show the math to your employer and ask them to get a thriftier custodian.
— Best, Steve
The Level3 withdrawal approach incorporates two types of assets. the first is equities: A high allocation to them is maintained to allow a portfolio to grow at a rate faster than inflation. the second is defensive: Defensive assets are those that are safe from the standpoint of a drop in actual value. such assets include short-term treasuries, CDs, & money market funds. the defensive allocation is established during the four-year period leading up to retirement. each year that the S&P 500 index starts within 5% of its previous high, one year’s worth of expected withdrawals is shifted from equity to defensive. once retired, withdrawals are taken from the equity allocation if the market is within 5% of its previous highs. If the S&P 500 is more than 5% below its highs, withdrawals are taken from the defensive portion. (see AAII.com for more Level 3 info)