The calls and e-mail began to arrive earlier in March. All with the same two 401(k) investment management concerns.
“When do we sell? I don’t want to lose the last several years of my stock and bond market gains.”
Worrying about catastrophic stock and bond market events will not save your 401(k). From the ravages of a stock market decline.
Logical, organized, and practical investment management decisions will. These investment management decisions will give you the confidence to “do something.” It is the only way to limit your stock market losses.
You own at least one 401(k) mutual fund you never should have bought in the first place. This mutual fund has never kept pace with the popular U.S. stock market benchmarks. When stock prices were going up.
On the recent downside? This same mutual fund is falling in value at a faster rate than the popular U.S. stock market benchmarks.
Underperformance on the way up. Outperformance on the way down. Not the ideal investment management strategy. To preserve or to grow you 401(k) account balance.
In almost every case. This same bad mutual fund is one of the most expensive options on the default 401(k) retirement plan menu.
You pay extra for none of the stock market upside. And you pay more for the extra stock market downside.
Expensive and poor-performing mutual funds do not provide the investment returns you deserve. You took all the risk investing in the stock market. But you never received the investment returns available.
Expensive and underperforming. Not a good company 401(k) retirement plan mutual fund combination.
Your default 401(k) mutual fund menu can be ranked. By annual costs. And by annual investment performance.
Did you fill out a March Madness bracket? Do you take part in fantasy football?
If so, you can figure out which 401(k) mutual funds to own. More important recently. Which 401(k) mutual funds not to own.
Individual investors can improve their 401(k) investment management decisions. With the help of an independent, third-party investment advisory source.
What about diversification and dollar cost averaging?
When stock prices are rising, those strategies will work. But you will still own too many lower-ranked 401(k) mutual funds. For the sake of a textbook investment management theory.
Your 401(k) deserves better now. And in the future.
Sell the worst 401(k) mutual fund you currently own. Put the proceeds from the sale into the money market account. Preserve your 401(k) principal. For the upcoming stock market “sale.”
When the current stock market decline settles down, reinvest your money market balance. In a less expensive mutual fund. And in one that offer better investment performance potential.
Sure, you have lost money in your 401(k) over the last few months. But here is a tip most 401(k) investors don’t think about.
It is a lot easier and faster to “get-your-money-back” in one of the best mutual funds in your 401(k). It is much harder to do if you own the wrong mutual fund in the first place. And do nothing to improve your 401(k) mutual funds when stocks are “on sale.”
Ric Lager
Lager & Company, Inc.
I have spent the last several years trying to figure out the best way to share my 401(k) advice content. I have tried Twitter, Facebook, company web site, and LinkedIn Groups. I now realize nothing beats a well-crafted newsletter delivered to your inbox once a week.
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