The end of the calendar year is often a time of self-reflection in the investment advice business. The end of the fateful year of 2020 makes any amount of personal time and self-reflection even more important.
This relentless U.S. stock markets rally has carried all the major U.S. stock market average close to all-time highs. But there is a complete disconnect between the stock markets strength and the realities of a world-wide pandemic economy.
Most client conversations in the last few weeks have included a summary of how the economic, stock, and bond market events are completely out of whack. To a person, every one of my current clients is very concerned about the preservation of their company 401(k) retirement plan account principal going forward.
It’s no wonder. The economic, political, public health, and investment landscapes are full of potential landmines for even the casual observer. My individual company 401(k) investment advice clients are much more than casual observers of the largest part of their retirement savings.
You don’t need to run out and sell everything now. Stock or bond market timing never works over the long term. Reflection does mean that you take the necessary steps to preserve the last several years of your stock and bond market investment gains.
The next great stock market decline will be one of the most widely anticipated in history. By the time a recession is officially declared, you won’t need to react. The largest part of the stock and bond market damage to your company 401(k) damage will already be done.
Falling stock market and rising interest rates are inevitable in your 401(k). But the full participation in those nerve-shattering losses is not.
Fortunately, today’s investment management technology allows individual company 401(k) retirement plan participants to access independent, third-party, investment management information in the early stages of the next great stock market decline or interest rate rise.
Take your year-end downtime to firmly establish a simple and straightforward investment management strategy to preserve your company 401(k) principal.
Remember that your primary long-goal goal of participating in your company 401(k) plan is to grow your retirement capital. The secondary goal is to preserve your capital when the risk levels when stock and bond market elements change.
The quicker a stock or index rises, the greater the possibility there will be a strong reversal. You have fully participated in the upward move. Take the necessary steps now to not to fully participate in the dangerous decline.
U.S. interest rates have already begun to rise off historic lows. Bond and target date mutual funds have dropped in value accordingly. When the stock markets begin to lose altitude, have a principal preservation plan in place for your recent all-time high company 401(k) retirement plan account balance.
Ric Lager
Lager & Company, Inc.
