WJH2,
The money you use to pay back your 401(k) loan is not pre-tax. You don't get a tax deduction for paying back a loan to yourself. Nor are you actually generating any return for yourself.

Think of it this way. I have $20,000 in account #1, and $10,000 in account #2. This means I have a net worth of $30,000. If I take a loan of $20,000 from account #1 and put it in account #2, now my net balance in account #1 is $0, my net balance in account #2 is $30,000, and I'm still worth $30,000. If I then begin to pay 6% interest back for the loan for account #1, after the first payment account #1 is back up to $1,200, and account #2 is down to $28,800. And I'm STILL worth $30,000.

Taking a loan against your 401(k) so you can pay yourself back in "interest" does not enhance your returns or your net worth in any way. You're simply moving money that's already yours from one account to another. Except, as Kristen pointed out, you're going to use after-tax dollars to pay down your loan interest, and then still pay taxes on that loan interest again in the form of taxation on IRA withdrawals in the future. So you would actually come out behind with this strategy in most scenarios.

If you want to change the investments in your 401(k) plan to something that has a lower risk of loss, you can certainly do that. Of course, that also bears the risk that you are not invested when the markets go up again, and you'll have to decide which risks are more important to you.

But taking out a loan just to pay yourself interest will not generate any wealth for you, because every dollar of interest you "earn" on your 401(k) loan - which you'll have to pay taxes on in the future - will simply come out of your other existing accounts (without a tax deduction).

I hope that helps a little!