As usual, I had SiriusXM radio blaring away at around 5:30 AM in the morning. In my car on the way to my morning workout. It is a good thing I do not have neighbors close to my driveway.
The rabbits do not mind the noise that time of morning. If I continue to let them eat my Hosta.
“Honky Cat” by Elton John pops on to the 70’s channel. The familiar lyrics got me thinking. About the 401(k) mutual fund selection problems most investors go through.
Here are the last two line of the first chorus:
“It is like trying to find gold in a sliver mine
It is like trying to drink whiskey from a bottle of wine”
It hit me. Those two sentences define the 401(k) mutual fund selection problem. Faced by most individual 401(k) investors. In their efforts to preserve and grow the value of their retirement accounts.
They own the wrong mutual funds. They think they own gold. But silver has been the best investment option on their default 401(k) menu for several quarters. And no one has ever told them about it.
A similar analogy applies to the stock and bond markets over the last few weeks.
401(k) investors think they can “get back to even” continuing to drink whiskey. Wine has taken over investment performance leadership on their default mutual fund menu. Again, no one has told them about this important change.
Individual investors own 401(k) mutual funds for any number of reasons. But those mutual fund selections have not kept pace. With stock market volatility. Or rising interest rates.
Follow the advice of Sir Elton John. Even though he was not thinking about 401(k) investing in 1972.
You must own the right mutual funds in your 401(k). To both preserve and grow your retirement account value. That works best when the stock market is going up. And interest rates are going down.
Right now, you must “flip the script.”
You own 401(k) mutual funds that have gone down in value at a much faster rate than the overall stock market averages. But it gets worse.
Those same mutual funds will highly likely not recover their value. At the same rate as the overall stock market averages. When the stock markets find a bottom.
If you do not know the best mutual funds to own now on your default 401(k) menu, comment below. Share your 401(k) menu. The best mutual funds are easy to identify if you know where to look. And what to look for.
Ric Lager
Lager & Company, Inc.
