Timid Investors Hurt Your 401k Last Year

If your 401k didn't grow by ten percent last year -- as the S&P 500 did -- you may wonder why. The answer is: fear.

STA Wealth Management's Michael Smith says too many investors remain cautious after the 2008 financial crisis.

"Most investors still have not gotten over 2008; their fear of another 2008 remains one of the number one things they fear."

Smith says a little less timidity could have made a big difference.

"Many people sat with more cash, more on the sidelines, were not engaged in the market and found themselves underperforming."

However, Smith says this is probably not a good time to make risky investments; he says the markets may be overvalued.

"Oh, I would not go jump in right now; I think markets are very lofty. However, I would make plans to gradually increase your allocation if you're underweight and certainly, if you're overexposed to the market, I would probably be looking to decrease your weight and get more in line with where you should be."

Experts say it's still a good idea to diversify your portfolio in low-cost index funds.

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