I opened my first investment advice account for an individual company 401(k) investor in 1999. Since that time, I have learned the two main elements that make for a successful long-term company 401(k) investment management strategy.
The first element is intelligence. Individual company 401(k) retirement plan participants have to take the time to understand their main menu of mutual fund options.
The more you know about the annual costs and investment performance on your default mutual fund options in your 401(k), the better mutual fund selection decisions you will make.
Most individual company 401(k) investors would rather follow the old standards of “buy-and-hold” and “diversification” than choose the best mutual funds available to them.
The investment management strategy lesson here is that all the financial media propaganda in the world can’t help you preserve and grow your retirement savings.
Smart people often fall into the investment management psychology trap of always wanting to be in the right. They fear embarrassment more than they fear financial losses.
I know lots of smart people who are terrible stock market investors. And I know some long-time clients of mine that still don’t know anything about the stock market who have seven-figure 401(k) accounts now.
The second element of a great long-term company 401(k) retirement plan account investment management strategy is to “know what you don’t know.” More specifically, my individual company 401(k) investment advice clients realize they need independent, third-party investment advice to get the most out of their 401(k) account.
A lot of individual investors never admit they don’t have the time or experience to manage their company 401(k) retirement plan account. They think the stock market always goes up; and they will retire before it goes down again in a big way.
I have been sifting through the hay stack of company 401k) default mutual funds for over 21 years. There are no guarantees in the investment advice business. But I am confident in the fact that I can find the handful of mutual funds you should own right now in your 401(k) account. Much better and faster than you can.
Experience counts for a lot. Sophistication with investment management technology counts for even more.
Even better, I get scared easy. I don’t have the stock market overconfidence that I see so often with younger company 401(k) investors. Over the years, I have learned how to manage stock market risk.
As you get closer to your desired retirement date, remember the most important thing I have learned over the years. It’s not how much money you and your company contribute to your 401(k) that matters, it’s how much of those contributions you keep that is most important.
Ric Lager
Lager & Company, Inc.
