Stock market corrections are a normal part of the historical stock market cycle. Every few years stock prices to come back down in line with realistic prospects for economic growth and company earnings.
Why do the mutual fund companies that manage your company 401(k) retirement plan account not take these historical facts into consideration?
Mutual fund companies buy-and hope when the U.S. economy falters and the stock market declines. They continue to hold the stocks in your company 401(k) retirement plan mutual funds because that is how they earn the most investment management fees.
The financial media is in on this scam as well. How many “don’t panic” and “hang in there” articles have you read and interviews have you heard in the last six weeks?
Here is the real reason for the “buy-and-hold” message. What companies spend the most money on television, print, and online advertising? You guessed it, the financial service companies that own the largest mutual funds.
The mutual fund companies really don’t manage the stock market risk in your company 401(k) retirement plan account. Mutual fund companies and company 401(k) retirement plan investment advisors spend most of their time trying to find more people to invest money with them. They don’t have time to manage stock market risk.
The primary concern of company 401(k) retirement plan mutual fund companies is how to keep you 100% invested in the stock market. Sadly, the same can be said for the vast majority of investment advisors. They also only get paid when you remain 100% invested at all times.
Mutual fund companies invented buy-and-hold, set-it-and-forget-it, and dollar cost averaging. And the financial media bought it completely. Both parties don’t want you to pay any attention to your current company 401(k) retirement plan account values.
The only person in the investment management equation who can actually do something to preserve the principal in your company 401(k) retirement plan mutual funds is you. Now is another historical example of that fact.
You can’t afford to do nothing. Don’t let the mutual fund companies desert your 401(k) retirement plan account again. Remember, you buy, and they hold.
Buy-and-hold will have its day in the sun again sometime soon. Just not right now. Don’t lose giant amounts of your company 401(k) retirement plan money listening to the same marketing message that you have in the past.
Ric Lager
Lager & Company, Inc.
