Over the last six-plus years you have never had to pay attention to your company 401(k) stock market mutual fund investments. Every stock market mutual fund is at a higher price. Personal and company-matching contributions have your company 401(k) retirement plan account value near all-time highs.
The stock markets have weakened noticeably in the last few months. Now is the best time to make sure you don’t make the stock market mistakes that you have made in the past.
I am not suggesting that you “sell everything” that you own in the stock market. I do think that thinking about these four questions will go a long way towards helping preserve the last few years of your company 401(k) retirement plan gains.
First, what do you think that the overall trend of the U.S. economy will be for the next couple of years? The stock market will lead to the downside as soon as the U.S. economy begins to slow down. Investment professionals will sell their shares as soon as they see any signs of economic slowdown. More sellers than buyers of stocks will trigger the next stock market decline.
Second, do your current company 401(k) retirement plan mutual fund holdings include the best options available to you? There is a good chance that other mutual funds on your menu would hold their value better in a stock market decline.
Go back and check the descriptions of your current stock mutual funds. A 100% stock market fund might be more risk than you want to take now. The money market fund may even be a short-term option for some of your retirement plan balance.
Third, when do you think interest rates will rise? Many Federal Reserve members have talked publically about higher interest rates soon. Lower interest rates have propelled the stock market higher for several years. When interest rates begin to rise stock prices will have to adjust.
Last, are you still making your investment management decisions based on what you hear and read in the financial media? It is always a good day to buy into the stock market if you listen to financial cable TV or read financial web site commentary.
There is no accountability in the financial media. Their money is not at stake and their advice is free. Individual company 401(k) retirement plan participants are taking all the stock market risk. A repeat of the 2008-2009 stock market decline would wipe out several years of stock market gains.
Ric Lager
Lager & Company, Inc.
