I wrote this article back on August 26, 2011 on my Golden Valley Patch Blog.
I was in Philadelphia last week, presenting in a video teleconference for the Society of Financial Service Professionals on the topic of “Managing Assets Earmarked for Retirement.”
Every time I give a presentation on the East Coast, I love taking the taxi ride from the airport into downtown. Invariably, the cab driver asks where I am from and what business I am in.
Like a good Minnesota citizen, I proudly told the cab driver what I do for a living and why I was in his lovely city. As all good cab drivers will do, he immediately ceased on the opportunity to vent his frustration with an “out of town expert.” Here is his response.
“I am too old for this kind of stock market. I have been doing what all the financial experts say to do for the last 10 years. All I ever do is stay invested in the stock market. And I have never made any money yet. That ‘buy-and-hold’ stuff, forget about it”
I am not an expert in East Coast dialect. But I think that “forget about it” means that the cab driver’s long-term stock market investment returns to date are not what he expected.
The stock market will always do in the future what it has always done in the past. Like the U.S. economy, the stock markets go through cycles every few years. Lately, those stock market cycles have been every few months.
Buy and hold is not a realistic 401(k) investment management strategy today. A buy-and-hold investment strategy assumes that if you stay invested in the stock market long enough, “everything will be all right” by the time you want to retire.
How has the buy-and-hold investment strategy worked out on your house over the last few years? What happens to the value of your car when you “buy and hold” it?
At some point, the same logic and common sense we use in everyday life has to be applied to our investments too.
The investment management of your company retirement plan has to consistently reflect the current U.S. economic and stock market cycles.
Now is a good time to begin a more logical, organized and realistic investment management approach to your company retirement plan account. No guarantee from me, but I think that the investment results could not get much worse than the last few years.
Has the “buy-and-hold” approach to your company 401(k) account failed you? Respond to this blog post if you want to share your company retirement plan account investment return frustrations.
Ric Lager
Lager & Company, Inc.
