One of the many Wall Street wisdom’s I remember from my younger days is the comment about, “Generals always fight the last war.” 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 2020. The good news is that in 2020, another old Wall Street wisdom applies. 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 months.
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 going forward is very likely to be a much more difficult task.
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” will become the most critical part of your investment management decisions.
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 preserve 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 company 401(k) account investment management battle. Put a plan in place now, so you don’t make emotional decisions later. How much money are you prepared to lose in your primary retirement savings account?
Ric Lager
Lager & Company, Inc.
