“Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy.”
The above quote is attributed to Dale Carnegie. His comments reflect the right frame of mind to have now regarding the investment management of your company 401(k) retirement plan account.
As you know, the coronavirus situation has been battering the stock market. Many individual investors are worried about what the current stock market volatility means for their 401(k) account balances.
Under normal circumstances, most people deal with worry by going for a walk, visiting a favorite haunt or hanging out with friends. But due to social distancing, that’s not really possible right now. Indeed, some people are physically confined to their homes for the time being to protect both themselves and others.
Given all that, it is easier than ever to let fear and worry’ take over. And no one can be blamed for thinking there is simply nothing you can do about the recent historic losses of your retirement savings.
I disagree with fear and inaction. You can do something about it going forward. You don’t need to continue to ‘sit home and think about it’.
There are things we can do now to protect your company 401(k) retirement plan account. You are not powerless. Even if a buy-and-hold or set-it-and-forget it investment management strategy is your natural state.
True, no one can control what the stock markets do – but we can control how we react to them. By reviewing your current 401(k) mutual funds, you can better understand exactly how much risk you are taking now with your retirement savings.
Your investment management strategy needs to change. Your number one priority is the preservation of your company 401(k) retirement plan principal. The opportunity to grow your retirement savings needs to take a back seat for the time being.
You most likely own a few mutual funds in your company 401(k) retirement plan account that have dropped in value at a faster rate than other mutual funds available to you.
Pick an “up” stock market day, and sell those mutual funds. Place the proceeds from that sale into the safety of the money market account option. This is the best way to “go out and get busy” in your 401(k) now.
The sale of these lagging mutual funds will make you feel more in control of your retirement plan account management. You will now have a plan in place to preserve your company 401(k) retirement plan principal. With these sales comes the feeling that you are doing something positive to get through this current bear market – instead of just waiting to see what happens next.
The attention your give to your company 401(k) retirement plan account now will generate the momentum to pay closer attention to your retirement nest egg going forward.
Even more important, your company 401(k) retirement plan account will have a money market balance in order to take advantage of the current stock market “sales prices.”
The best way to rebuild your 401(k) savings going forward is very simple. You need to narrow the mutual funds you own to the short list of the best mutual funds available on your menu of options. Sell all the mutual funds you own now that don’t meet that important investment management criteria.
Coronavirus may be able to stop people from going to work, or to school, or to restaurants. But it does not need to stop you from preserving the value of your company 401(k) account. Or properly investing it for the future.
Ric Lager
Lager & Company, Inc.
