Weekend Linkage: 10,000, 401(k)s and Closing Costs

by Jason Unger

Although the week ended with the Dow Jones under 10,000, when it passed the mark on Wednesday, I sent out this tweet:

The Dow is over 10,000. Let’s party like it’s October 2008!

Of course, I was joking, but it is a significant milestone — at least for day traders, who often react only to perceived events.

According to the Wall Street Journal, the Dow at 10,000 has investors worried, perhaps — this time — because enough people aren’t worried.

Back at the market lows in March, I warned about “efficient market hypnosis” — the way the falling market hypnotized some investors into believing the world was coming to an end. The same logic holds now. Just because the Dow is back at 10000 doesn’t mean our economic problems are somehow behind us.

For buy-and-hold investors who practice dollar-cost averaging, hitting 10,000 doesn’t mean that much. I wouldn’t fret about it, one way or the other.

I didn’t catch Time magazine’s article about 401(k)s, but it has both Trent at The Simple Dollar and the folks at Vanguard responding negatively.

At the Vanguard blog, Steve Utkus calls it Bad facts, bad story:

One phrase captures the spirit of the cover story: 401(k)s are a ?lousy idea, a financial flop.? And that was perhaps the high moment of the article! I have read Time over the years and have enjoyed its presentation of national and world events. Yet this article is emblematic of the uneven, at times unfair, coverage of 401(k)s during the market decline.

Trent says that the problem isn’t 401(k)s — it’s that people aren’t taking enough responsibility for their actions. “In the end, the investors who suffered a disastrous, life-altering 2008 in their 401(k) accounts were either contributing too little and essentially gambling with it or they didn?t bother to learn or understand how investing works.”

Finally this week — closing costs. Did you know my home state of Maryland, where I bought a house this year, has the highest closing costs in the country? It’s crazy how much cheaper they can be in different parts of the nation. MarketWatch breaks down the numbers.

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