Most people who own a home also own home owner’s insurance. Home lenders require home owner’s insurance. If your house burns to the ground, the insurance company will come in and pay you to replace your house.
When you receive your annual homeowner’s insurance premium notice, do you remind yourself what a terrible deal your homeowners insurance premium was last year because your house didn’t burn to the ground?
Individual investors need to apply this same investment management approach on the topic of insurance in regard to their company 401(k) retirement plan accounts.
Independent, third-party, fiduciary level investment advisors provide insurance for individual company 401(k) retirement plan account investors. The insurance is provided through stock and bond market risk management tactics and strategy.
Principal losses in your company 401(k) retirement plan account can be limited just like the potential losses on your home insurance policy. Think of annual investment advisory fees as premiums on the principal preservation of your company 401(k) retirement plan account.
In most of my client’s cases, the potential loss of principal company 401(k) retirement plan account damage is contained to an acceptable level of between 5-7%. Under no circumstances will a stock and or bond market loss exceed those levels.
You could not afford to rebuild your entire house; that is the reason for your home insurance. Start thinking in the same terms regarding your all-time high company 401(k) retirement plan account balance.
Your company 401(k) retirement plan account is most likely one of your largest financial assets; just like your house. Your company 401(k) account deserves the same type of principal protection insurance.
It is entirely possible to prevent the next historic stock market correction from stealing the last several years of investment gains from your company 401(k) retirement plan account.
When is the best time to buy hurricane insurance? The answer is before hurricane season starts. In the case of your company 401(k) retirement plan account insurance, put some in place before the next great stock market correction.
Ric Lager
Lager & Company, Inc.
