Seriously, I don't know. Should I move away from stocks and into bonds to lessen the blow? When it (semi)crashed 4 years ago I lost about 50% which I now have recoverd but it set me back timewise. So as not to go thru that again what are the best options to keep most of what I have in there now?
I don't think that there's any actual chance of default. If there is, it's going to be ugly. Really, really ugly. I've seen any number of ideas of what to do, they contradict each other, and I don't think that anyone knows what is going to happen. So, sorry, no help here.
If you're asking for advise on this board and the market has you spooked I say put it all in pork belly futures. But seriously, and this advice is worth what you paid for it, if you are scared then then move some of your money out and to dollar cost average back in when the market drops. If you are young I wouldn't worry too much what the market does in the short term. If you old or not so young with significant assests I'd talk to a fee only advisor you've throughly vetted. Good luck and good investing.
Are you in mutual funds or in actual stocks? If you are in stocks then you can put a stop loss at what ever you are comfortable with.
Balanced portfolio, get plenty of international in there, get some commodity exposure, and get some TIPS and high yield with the bonds. Keep expenses low. Hold forever. Never ever ever listen to some clown telling you to get out of the market -- they are always wrong, they didn't stop jabbering about how buy and hold was dead in 2009, which was EXACTLY the right time to buy and hold. That's it, basically.
I am a fan of using stop losses, but they dont take into account overnight gaps. Lets say you own a stock and bought it at $100. You set a stop loss for $95. Bad news related to the economy or stock comes out after market closes. Stock opens up at 80$. Since your stop got "triggered" way up at 95, but you get filled at 80. This is of course assuming you only get triggered after market hours. I am not sure if they have stops that can be executed overnight. And if they since the liquidity is much less, you might still get a fill away from your stop loss limit. You can also say, you only want it to get filled if it trades within a certain range of your stop loss. But again, if it blows through both limits, you still own the stock. Now, the chances of something like that happening are slim, but still the person should realize the potential is there for a similar situation to happen. And not think their stop loss price = execution price.
Stop loss orders cannot be triggered by the pre or post trading markets. They can be only triggered when the 9:30-4est trading day is open. When the stock opens at 930, if those prices open under your stop, you are absolutely correct, they will be sold. Most firms will also have Stop Limit orders, these aren't perfect though. A stop loss once triggered will turn into a market order and you will definately sell. If you place a stop limit your order turns into a limit order. So ABC closes at 10 bucks and you have a stop limit at 9.25. The next day it opens at 9.05, then your order will be switched from a stop limit to a limit at 9.25. Problem is if the market keeps falling your order will not be executed. Now admittedly, these are orders for stocks not Mutual Funds, most 401k's are in mutual funds only. You need to get educated about fees. Remember this is your life savings, its dubious at best Social Security will be around if you are under 50 years old, you need this money to work. You need to devote a day to your 401k every couple of years. Seriously, one day every 2 years. Call in sick to work or take a vacation day. Don't do this on Saturday or Sunday or a public holiday. Do it when the market is open. Most company employees working on a weekend are great at customer service but struggle with the actual logistics. Also buy a book and read one book a year about saving for retirement or investing. Print off all the available funds for your 401k and then make some calls to fund companies. Ask for 1, 3 and 5 year growth percentage. Ask about the fees. Write all this down. Fees aren't black and white. I'd happily pay 3% a year if the thing was making 9% for me. Thats a lot better than paying 0.5% a year but making 2%. Also think which sectors you want to go into. International, oil, commerce, shipping, computers what ever. Ask if they have exposure. All the companies 800 numbers can help you. Also, don't put all your eggs in one basket. Going all in to Gold might sound like a good idea, its probably not because you are essentially gambling. I also agree with earlier poster who said buy and hold. Don't try and day trade or time the market. All these firms have sophisticated algorythms and computer systems that do it and they do well, you will not. If you are worried I'd buy something that paid a monthly dividend, then when the market goes down, your divs are buying more and more shares, it will come up again and you'll be in a good place.
Another option that I forgot to mention is hedging your portfolio during uncertain times. Granted this is probably something that should be done with the help of a financial advisor, but basically you are placing bets(for the lack of a better word) against your portfolio to reduce risk. It can usually be done through options or shorting an index, the comparable amount of your long holdings, or at least a portion to help reduce some risk. That way if the market goes against you, you profit on the a portion of your portfolio. It is usually a temporary thing for times like these, and allows your protection without having to liquidate all of your holdings, and then get back in ,etc....
I do agree with you on over-night gapping. It was a really pain on the day of the "flash crash" to have 2/3s of my stop-losses trigger and have to buy back these stocks, but with months like we just had in August a stop loss is definitely worth it. I use to buy mutual funds, but I think the fees are too expensive too often these highly paid managers don't beat the market. In fact by pooling your money with a million other people you create a large entity that cannot get out of the market in a timely fashion when needed. The cost of trading your own stocks (if you have the disciple to only buy companies that you really know and understand) is much lower than mutual fund fees, and you can be nimble. (Which is different than day-trading).
Or, trade the best of both worlds. Exchange traded funds (ETF's). Basically indices based on sectors, passively managed, but traded on an exchange like a stock. These days, they are so popular (mainly for 1)the liquidity and 2)cheaper fees, both issues you mention), if you can think of the sector or region, its represented.