Clark Howard's Tips

Maximize your money in the market over time

September 8, 2008

Are you afraid to open your own mail for fear of seeing your 401(k) statement? Clark recently spoke to one man who referred to his plan as a 301(j) because it keeps going the wrong way!

The Financial Times of London reports that every mutual fund company is seeing people pull money out with all the market volatility. American Funds saw a 7% decline in assets during the last 90 days, while Vanguard has seen a 4% decline. Why is this happening? People fear a loss twice as much as they enjoy a gain. It's part of being human. We're backwards creatures; when stocks roar along, people pour money into them. So we're always paying too much on the way up and getting too little on the way down.

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No one can time the market.

Rather, it's time in the market that matters. Clark has 3 rules of thumb to help you maximize your money over the years.

-- Avoid paying commission fees. Buy only no-load funds.

-- Beware of 12b-1 fees. These are phony charges that won't be disclosed unless you read through the prospectus. They are a made-up fee designed to take money out of your pocket.

-- Make sure your management fees don't exceed 1% or more.

Avoid these 3 gotchas and you'll have more money over time. Just don't try to figure out when to sell and when to buy. Keep buying every month through your 401(k) or other retirement plan.

Time in is more important than timing. People are always asking Clark, "Is it time yet to get back in the market?" His standard reply is, "I never got out."

More Clark Howard Money Management Tips Beware of impostor money market fund investments  Investigate charities thoroughly before giving them money  Clark's 529 Plan Guide has been updated!  Mandatory private accounts may solve SS dilemma  Free budgeting tools online!  Avoid the full-commission stock broker trap  Avoid the full-commission stock broker trap  Scams heat up when economy cools down  The dangers of purchasing employer stock  Free budgeting tools online!  Full list