I have been providing investment advice to individual investors for over 34 years. Over that time, I have learned one of the most important aspects of my job.
As the economic, political, interest rate, and stock market risk levels change, I am constantly vigilant in managing how much risk my individual company 401(k) retirement plan participant clients are taking in real time.
September 30, 2018 was the most recent U.S. stock market highs. The current risk levels are much higher now than they were on that date. The key now is to become more aware of the dramatic stock market risk level changes that have taken place since then.
My individual company 401(k) retirement plan participant investment advice clients have taken the necessary principal preservation steps over the last few weeks that other people wish they had done earlier.
Investment management strategy moves that preserve company 401(k) retirement plan principal are useless after a major stock market decline.
When is the worst time to buy a home-security system? After a break-in. When is the worst time to buy hurricane insurance? After a hurricane. When’s the worst time to check your tire pressure? After you’ve already had a blowout.
You get the idea.
The current round of stock market volatility and rapid declines were long overdue. That is exactly why a stock market risk management plan always needs to be in place.
It’s not too late for you to take the necessary steps to preserve the largest amount of company 401(k) retirement plan account principal. The current mutual funds you own in your 401(k) fall into two main groups now.
First, you own mutual funds that you should have never bought in the first place. Sure, they went up in value when the overall stock market went up. But their investment performance has always lagged other mutual funds you could have owned instead.
Worse, these lagging mutual funds have most likely declined at a much more rapid rate that the overall stock markets over the last few weeks.
Sell those bad mutual funds now and put the proceeds into the safety of the money market account option in your company 401(k) account.
The second group of mutual funds you own are decent mutual funds. They outperformed the popular stock market averages on the way up. And they have held their value better than those same stock market averages over the last few weeks.
These mutual funds you can continue to own now. You can buy more of this second group of mutual funds as soon as the current stock market declines runs its course.
In order to improve the quality of the mutual funds you own in your company 401(k) account, you have to build up a money market account position first. That is the best way to save your company 401(k) retirement plan account now.
Ric Lager
Lager & Company, Inc.
