I am sure that you have noticed that there have been many conditions of three’s in every phase of your life.
The Three Musketeers, The Three Stooges, and Goldilocks and the Three Bears. How many medal do they give out in the Olympics? Three—Gold, Silver, and Bronze.
The most common business outlooks can be summarized as optimistic, “stay the same,” or pessimistic about future prospects.
Your investment management game plan for your company 401(k) retirement plan account can also be broken down into three possible strategies.
In the first strategy, you can try to predict the investment returns in your company 401(k) retirement plan account. In the last few years, there has been an explosion of online software firms that will “model” your retirement plan investment returns for the rest of your working career.
I am old enough to remember investment newsletters that actually came in the mailbox. These new software programs remind me of those newsletters. Instead of mailbox delivery, you can receive the information on your cell phone so you can view it instead of actually talking to someone.
The second strategy is by far the most common. It allows you to “do nothing” with your company 401(k) retirement plan account. This investment management strategy is the definition of the “buy-and-hold” promoted by financial service companies and mutual fund companies.
The vast majority of investment advisors hide behind Modern Portfolio Theory and Strategic Allocation. These textbook theories ignore the realities of economic trends and stock/bond market movements. Faith and historic investment performance are intended to help you ride out any stock market volatility.
I think that a third investment management strategy for your company 401(k) retirement plan account is the most realistic. Here you identify the prevailing economic and stock market trends. Then adapt your investment risk management strategy as those trends change.
This company 401(k) retirement plan investment management strategy is to be able to adapt to trends as they change tomorrow. You don’t have to predict. You don’t have to ride the stock market elevator all the way down to the bottom every few years.
There is always a crisis to be worried about regarding the stock market exposure in your company 401(k) retirement plan. The key is knowing when a crisis warrants a change in how much risk you take with your company 401(k) retirement plan holdings.
Ric Lager
Lager & Company, Inc.
