Numerous academic and financial industry studies have proven Relative Strength to be one of the premier investment management strategies available today. Another name for a Relative Strength strategy is Momentum.
Relative Strength is focused on owning securities that have a short-term and long-term history of outperforming a broad stock market benchmark. In the case of mutual funds found on a company 401(k) retirement plan menu, strong Relative Strength mutual funds have outperformed other mutual funds in the same asset class.
Combining long-term and short-term Relative Strength rankings is a great company 401(k) retirement plan mutual fund selection strategy.
A Relative Strength measurement can be applied to any of the default mutual funds on your default company 401(k) retirement plan account menu. From there, each mutual fund is ranked on its Relative Strength score.
The Relative Strength rankings also show how each default company 401(k) retirement plan mutual fund option compares to every other option.
If you are a golfer, you understand the Official World Golf Rankings. If you are a college football fan, you have just lived through the first-ever NCAA College Football Rankings playoff games.
Both of these rankings work to indentify the strongest players and team at any point during the season. Relative Strength ranking can do the same thing on your company 401(k) retirement plan default mutual fund menu.
Strong Relative Strength mutual funds go up at a faster pace in a strong stock market environment. In a falling stock market environment, these mutual funds hold on to their net asset value price better than poor Relative Strength mutual funds.
Relative Strength does not predict the direction of stock prices. If the prevailing stock market direction moves higher, you have the peace of minding knowing that you own the best company 401(k) retirement plan mutual funds available. When the stock market trend changes, the Relative Strength measurement is likely to suggest a change in your current company 401(k) retirement plan mutual fund holdings.
A Relative Strength based investment management strategy does not manage stock or bond market risk. The best use of involves the decision of “what to buy” on a company 401(k) retirement plan menu.
The Relative Strength tools are out there. Find an independent investment advisor to rank your company 401(k) retirement plan menu mutual funds for you. And help you interpret the results.
Ric Lager
Lager & Company, Inc.
