I have seen these two company 401(k) retirement plan investment management decision making mistakes time and time again. These mistakes never change because they are made by human beings; and humans most times never learn from their past investment management mistakes.
First, individual company 401(k) retirement plan participants don’t make enough investment management decisions. They decide how much money to contribute each year to their company 401(k). But most times, that is where the decisions come to an end.
Individuals investors need to do more homework on the mutual funds that invest their company 401(k) retirement plan monies. How are they ranked? How do the annual expenses compare? What is the percentage of stocks versus bonds in the mutual fund?
More very important investment management decisions have to be made. And those decisions need to be adjusted as the stock and bond markets change risk levels.
Right now, stocks are falling and interest rates are rising. There really is “no place to hide” on your company 401(k) retirement plan menu.
Second, bad investment management decisions are not changed in a timely manner. The stock and bond markets go through cycles. Asset classes go in and out of favor over time.
Poor company 401(k) retirement plan mutual fund decisions need to be changed as the economic, political, and market environments change. There is a timeless Wall Street adage that explains perfectly the need to change your investment management mind.
“It is O.K. to be wrong, but it is not O.K. to stay wrong.”
The stock market can fall a lot more and interest rates can rise a lot more from these levels. The potential exists to lose a great deal of company 401(k) retirement plan principal by remaining fully invested in bad mutual funds going forward.
Company 401(k) retirement plan investment management decisions can be easily improved. Now is a great time to completely start over with the reasons why you own any of your company 401(k) retirement plan mutual funds.
Ric Lager
Lager & Company, Inc.
