1. When the large pools of money that control the stock markets want “out of the market at any price,” individual investors need to have a game plan. You don’t want to be the one of the company retirement plan investors left asking, “What do I do now?” AFTER the stock market has fallen in a big way.
2. The value of stocks in the stock market is always based upon individual estimates of future company earnings. When those earnings estimates are lowered due to a slowdown in economic activity, the stock market will fall.
3. The supposed smart financial people on business television and the Internet are mostly cheerleaders for the stock market always moving higher. In their world it is always a good time to buy and own stocks. They have no logical, organized and disciplined game plan when the stock market moves lower.
4. Stock market bottoms can only be profitable long-term investment opportunities if you have money in your 401(k) money market account to reinvest. When the stock market crashes, think of it like a big sale on your favorite items at Target. When the sale at Target comes, you need to either have the cash in hand or room on your credit card in order to take full advantage of the “sale.” It is no different when the stock market is “on sale.”
5. In the stock market crash of September 2011, government bond mutual funds saved many 401(k) investors for even larger stock market losses. Realize that this is a temporary condition, because when interest rates rise again, bond mutual funds will have their own market crash.
6. If you remained 100 percent invested in the stock market this year, you have lost a great deal of money so far. The only investment decision left to make now is to change in the future the way you have always managed the investment decisions in the past in your company retirement plan.
7. The last big stock market crash occurred just three summers ago. Another stock market meltdown will happen again. Soon. The current “Buy-and-Hope” investment strategy in your company retirement plan needs to change.
Ric Lager
Lager & Company, Inc.
