What is a good 401k investment if the economy crashes?
When the economy crashes stocks go down in value and investment grade bonds often go up in value as interest rates drop. To protect your 401k from a crash you may want to hold a portfolio of investment grade bonds in your 401k. Of course, once the crash has reached the bottom then you need to consider switching to stocks.
The best way to own investment grade bonds is to buy no load open-end institutional class shares of mutual funds that specialize in bonds. To understand more see my article “Protect 401k from stock crash with investment grade bonds.”
Avoid buying Eurozone related investments in your 401k. I wrote an article “Euro collapse to hurt 401k’s.
Stocks are 50% overpriced and need to decline at least 33% to be fairly valued. To really ignite a new stock bull market stocks need to go very low to a capitulation phase level of roughly a 10PE using the PE10 formula, which would be slightly lower than the SP’s low of 666 points reached in March, 2009.
Investors should seek independent financial advice.