I have provided investment advice to individual 401(k) plan participants for 24 years. I know the following fact about individual 401(k) investor behavior to be true.
Individual investors rarely get upset. With 401(k) principal losses within their acceptable range.
Losses of 5-10% of their 401(k) retirement plan account principal are acceptable. I use those “stop loss” levels for all my individual 401(k) investment advice clients.
My 401(k) advice clients can sleep better at night. Knowing the dollar amount or percentage at risk with their retirement savings.
Stock market history tends to repeat itself. Especially during stock market declines.
My 401(k) advice client’s losses will be less than the popular stock market averages. An example would be the S&P 500.
The reason is the choice of their current 401(k) mutual funds. My 401(k) advice clients own mutual funds that have positive Relative Strength. Said another way, these mutual funds are “outperforming” the popular stock market benchmark. Again, the S&P 500.
On the upside, positive Relative Strength mutual funds rise at a faster rate. Than stock market benchmarks. On the downside, those same mutual funds would fall at a slower rate.
Small losses are part of stock market investing. This level of stock market losses can recover in a few short years. Especially when you own positive Relative Strength 401(k) mutual funds.
The stock markets don’t go up forever. That is the reason a comprehensive 401(k) investment management strategy is important. Especially during periods of high stock market volatility like we have now.
Why don’t you ever hear about a stock market loss strategy from your 401(k) retirement plan sponsor? Or your 401(k) mutual fund manager?
Every day is a wonderful day to be 100% invested in the stock market. According to every mutual fund manager who ever lived. And every company that offers a 401(k) retirement plan.
Has your current investment advisor asked you how much stock market risk you are willing to take now? Inside or outside of your company 401(k) account?
Company 401(k) retirement plan stock market risk is manageable. You can limit the percentage or dollar amount of your 401(k) that you can lose.
You don’t have to “do nothing’ during the current stock market volatility. Or downside. There are smarter, better, and faster investment management options available to you.
Independent, third-party, fiduciary level investment analysis. Of all your default 401(k) mutual funds. Along with a review of your current levels of 401(k) stock market risk.
The last step is to determine the stock market losses with which you can live. Now or in the future of your 401(k) retirement account.
It makes no sense at all to lose the last several years of your 401(k) stock and bond market investment gains. Along with your personal and company-matching 401(k) contributions.
Ric Lager
Lager & Company, Inc.
I have spent the last several years trying to figure out the best way to share my 401(k) advice content. I have tried Twitter, Facebook, company web site, and LinkedIn Groups. I now realize nothing beats a well-crafted newsletter delivered to your inbox once a week.
Sign-up here.
P.S. If you like the content, hit reply, and start a conversation. I can help you figure out your current 401(k) mutual fund stock market risk level.
