By far the most important driver of successful long-term success managing your company 401(k) retirement plan account is to improve the quality of your investment management decisions.
The stock and bond markets are constantly adapting and changing. Add to that fact the inevitable economic and political cycles. The average individual investor can easily feel overwhelmed regarding their investment management responsibilities.
Albert Einstein once stated that, “Not everything that can be counted counts.” He easily could have been talking about the daily avalanche of stock and bond market commentary and forecasts.
Improving your company 401(k) retirement plan investment management decisions is not that hard. There are only two primary investment management decisions that are required.
First, “what do I buy?” Which of the confusing collection of company 401(k) retirement plan menu mutual funds is best for me?
Don’t be concerned. The investment management technology available today is astounding.
There is clearly a gap between the good and bond mutual funds on your company 401(k) retirement plan menu. In fifteen minutes, a junior high school math class could learn how to pick the best handful of mutual funds to own on any company 401(k) retirement plan menu.
Most independent, third-party investment advisors can provide this information. If you don’t have this resource, now is a good time to begin the search process.
The bad news here is that you can never rely on your company 401(k) retirement plan sponsor (your company) or your plan provider (Schwab, Fidelity, Vanguard, etc.) for this information.
Your company does not want the fiduciary responsibility that comes along with providing investment advice to you. And you guessed right. Your company 401(k) retirement plan provider has mutual funds to sell you.
The second required investment management decision is, “when do I sell?” When, not if, the stock market takes another fall, you need to take the necessary steps to take less stock market risk.
The preservation of your company 401(k) retirement plan principal needs to become your primary investment management goal. If you do what other individuals don’t, your chances for preservation and growth of your company 401(k) dramatically improve.
The question that only you must take the time to answer is, “how much risk am I willing to take?” Understand the logic of setting automated stop losses that protect stock market gains and annual company 401(k) contributions.
The answer to these two investment management decisions will greatly determine future investment returns from company 401(k) mutual funds. The answers to these two questions are the only investment management elements you can control.
Pick the best mutual funds available. Don’t take excessive stock and bond market risks.
Ric Lager
Lager & Company, Inc.
