SA Meredith...Keeping some cash on hand allows you to buy into the market when it has a large drop (777) points is a HUGE drop to say the least. I guess you can say I "short sell" in my 401K all the time. I buy into the "DOW" fund in my plan (401K) let it go up a hundred points then move it all out. After you just wait for it to come down and do it again. I am not in the financial "biz" but have averaged 15% returns for the last three years (since I started doing this.) Double-Digit returns in any 401K or IRA is relatively simple to achieve. If your not AT LEAST into double-digit returns (10+%) every year your doing something wrong. I say 3 years cause I've only started doing this for that long and started putting my 401K front and center. My best year has been 23.3% and lowest was 14.2%. This year I won't break 10% but hey look around, what "average Joe" will?
Next year I'm guaranteed to be right there again. I know this cause I got away from my strategy in the first quarter of '08 and watched my account go to -8% never again.
I'm almost 48 and hope (and expect) to be at a cool million dollar balance by my middle 50's....That's my goal. This strategy is not for the faint of heart moving around six figures into a fund that drops doesn't feel too good. For me the rewards have out-weighed the losses.