The end of the calendar year is often a time of self-reflection in the investment advice business. In this blog post, I am going to ask you to devote some time to the timeline of events in your company 401(k) retirement plan account this last year.
This relentless rally has carried the S&P 500 more than 9% higher between October 2 and the end of November. The index hit 11 record highs last month. Those records were accomplished in only 20 trading days.
Most client conversations in the last few weeks have included a summary of how the economic, stock, and bond market events have been reflected in the year-to-date investment performance of individual company 401(k) retirement plan accounts.
To a person, every one of my current clients is very concerned about the preservation of their company 401(k) retirement plan account principal going forward.
It’s no wonder. The economic, political, and investment landscapes are full of potential landmines for even the casual observer. My clients are much more than casual observers of their 401(k) retirement plan accounts.
You don’t need to run out and sell everything now. Stock or bond market timing never works over the long term. Reflection now does mean that you take the necessary steps to preserve the last several years of your stock and bond market investment gains.
The next great world-wide recession will be one of the most widely anticipated in history. By the time a recession is officially declared, you won’t need to react. The largest part of the stock and bond market damage to your company 401(k) damage will already be done.
Falling stock market and rising interest rates are inevitable in your 401(k). But the full participation in those nerve-shattering losses is not.
Fortunately, today’s technology allows individual company 401(k) retirement plan participants the ability to make independent, third-party, investment management decisions in the early stages of the next great stock market decline or interest rate rise.
You have the opportunity now to put in place a simple and straightforward investment management strategy to preserve your company 401(k) principal.
Remember that your primary long-goal goal of participating in your company 401(k) plan is to grow and preserve your capital. The secondary goal is to manage your risk levels when stock and bond market elements change.
The quicker a stock or index rises, the greater the possibility there will be a strong reversal. You have fully participated in the upward move. You can choose right now not to fully participate in the dangerous decline.
Ric Lager
Lager & Company, Inc.
