Admit it. You hate watching your 401(k) retirement plan account. Especially the last few months.
I make that bold statement based on my 24-plus years of providing 401(k) investment advice. That advice includes the important, “what to buy?” question. Lately, the even more important, “when do I sell? question.
I have a great deal of confidence in the following three 401(k) participant observations.
First, reviewing your 401(k) statement on a regular basis is not fun. I agree. My free time is also spent on other things I like to do.
But my 401(k) account is “a lot of money.” No matter how much money you think is a lot of money. There is no way on earth I am not going to pay attention to the stock and bond market risk levels of my 401(k).
My 401(k) advice clients are the same. Their 401(k) accounts account for the largest part of their retirement savings.
Periodic reviews of your stock and bond mutual funds can adjust your risk levels. Based on the current economic and stock market environments.
Apply your own COVID-19 life lessons here. Things can change. And many of those changes can affect your 401(k) account value.
Second, you think you already know where your 401(k) mutual fund money is being invested. Good for you if you do. Few 401(k) investors can make that statement.
But here is the truth. You do not know. Unless you have recently reviewed the top ten stock holdings in each 401(k) mutual fund you own. You don’t have a clue about how much stock market risk you are taking now.
Apple, Microsoft, Amazon, NVDIA, and Alphabet are over 21% of the total S&P 500 capitalization. That’s a large part of your popular 401(k) index fund invested in those five companies.
And your current company 401(k) “growth” mutual fund holdings are remarkably similar. You are most likely “up to your eyeballs” in a few stocks in your 401(k) mutual funds.
Worse, those few stocks are in only one primary stock market sector; technology.
Third, there is a very good chance that you don’t want to know more about your company 401(k). I get that. Why do you need to pay attention when the account value goes up all the time?
Until the last few months. Down big. Both stock and bond mutual funds.
Now is a good time to lose the most common 401(k) state of mind. It is time for a serious review of what makes up your 401(k).
Here is your 401(k) investment management decision question: Do you want to change?
Do you want to continue to own expensive 401(k) mutual funds that lag the stock market averages?
Do you care that you left tens of thousands of dollars on the table owning the wrong 401(k) mutual fund options?
What steps have you taken recently to preserve your 401(k) principal?
If you don’t care, I can’t convince you otherwise. If you do care, you don’t have much more to lose in your 401(k)?
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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