September is the best month of the entire year for football fans. High school, college, and NFL seasons all go full force this month.
All levels of football rank their teams during the regular season. Football fans pay close attention to those weekly rankings of their favorite teams. At the end of the season, there are playoffs and the crowning of a champion.
Have you ever thought about using the same type of ranking system to pick the best mutual funds to own on your default company 401(k) retirement plan mutual fund menu?
It’s easy. You pick a fantasy football team of the best players at each position. So, just select a fantasy mutual fund team for your company 401(k) account the same way.
First, all your company mutual fund options need to be ranked. The two most important investment management decisions used to rank mutual funds are investment performance and annual fees.
Many of my individual company 401(k) investment advice clients have owned the most expensive mutual funds available to them for years. That’s because the annual investment performance continues to be the best available on their default company 401(k) retirement plan menu.
It’s fine to own expensive mutual funds. Just make sure that their investment performance is more than worth how much it costs to own that fund each year.
Past investment performance leadership is often a positive indication of future outperformance. In the investment management world, that leadership concept is called Relative Strength.
Relative Strength ranking identifies both the winners and the losers on your default company 401(k) retirement plan menu. There is no more guessing at what to own or why to own it. The Relative Strength ranking “is what it is.”
Today’s investment management technology allows individual company 401(k) retirement plan participants to access mutual fund relative strength rankings. Relative Strength provides a head-to-head comparison of how each of your company 401(k) mutual funds compares to all your other mutual fund options.
These rankings clearly identify mutual fund “winners” that are outperforming the mutual fund “losers.” Can you see how the Relative Strength ranking your company 401(k) retirement plan mutual funds can improve your investment management decisions over the long-term?
You pick the best players available for your fantasy football team to begin the season. And you stick with them if they perform each week. The same concept applies to your company 401(k) mutual funds.
Your company 401(k) retirement plan provider will never share the most important investment performance ranking information with you. These plan providers just want you to remain fully invested in ANY mutual fund all the time.
The only way to know for sure that you own the best mutual fund options available on your company 401(k) retirement plan menu is to get the information from an independent, third-party database.
You don’t need to turn your company 401(k) retirement plan account into an active trading account. But wouldn’t it be nice to have the ranking information form an independent database in order to know which mutual funds are working and which ones are not?
Ric Lager
Lager & Company, Inc.
