One of the many Wall Street wisdom’s that I remember from my younger days is the comment about, “they are always fighting the last battle.” This adage is a stark reminder of adjusting your investment management decisions to reflect the current stock and bond market environments.
You can’t do anything now to improve your company 401(k) mutual fund choices in the past. The good news is that the truth of another old Wall Street wisdom applies here also. That is, “a rising tide raises all the boats in the marina.”
Your company 401(k) retirement plan account is near all-time highs. Whatever type of mutual funds you currently own-stock or bond- have gone up in value nicely over the last few quarters.
But don’t be fooled by your past investment management success. The ability to grow the value of your company 401(k) retirement plan account in 2019 is very likely coming to an end.
Economies and company earnings around the world are falling. In some cases, dramatically. Interest rates can’t go much lower. And if they do, how much will they stimulate economies and stock markets that are slowing down?
You can’t be focused on the new company 401(k) investment management war if you are still focused on the old one. It will never work for you.
Going forward, the age-old company 401(k) retirement plan investment management problem of “what to buy” is no longer important. Instead, your focus should be on “when to sell.”
Here is my response to the critics of market timing. Keep your uninformed comments to yourself. The truth is, you could not clearly define market timing if it sat next to you on your ride home from work.
Market timing has not one thing to do with the preservation of your company 401(k) retirement plan principal. The next investment management challenge you face is how to keep the greater part of the last 10+ years of stock and bond market investment gains in your 401(k) account.
The same challenge is required to keep your individual contributions and your company-matching contributions to your 401(k) over the same time period.
Do you insure your home? Your car? For heaven’s sake, I know clients who are now insuring their pets.
Don’t fight the last battle in your company 401(k) account. Have a principal insurance plan in place before the next great stock market fall or interest rate rise takes place. It is not “if” one or both of these events takes place. It is “when.”
Fight the upcoming battle. How much money are you prepared to lose in your company 401(k) retirement plan account?
Ric Lager
Lager & Company, Inc.
