I wrote about this same concept last week. The continued stock market volatility makes this message even more timely and bears repeating.
The mutual fund managers that you have hired to manage your company 401(k) retirement plan account don’t have the option to go to the money market account when the stock market drops dramatically.
You do.
In the last week, you have read and heard all the predictable messages from every mutual fund company in the world.
“Market sell-offs are a great opportunity to buy at lower levels.”
“You’re not smart enough to get back in when the stock market bottoms.”
“Just buy and hold and everything will be OK”.
All of these messages a promoted for the good of the mutual fund company, not yours.
The first rule of investing in the stock market is to have an investment management strategy in place to protect what you already have. With stocks falling dramatically, that rule needs to be strictly enforced by all individual company 401(k) retirement plan investors.
Now is not the time to believe the financial pundits whose message is that it is always a good day to be 100% invested in the stock market.
Don’t let anyone tell you that building and maintaining a money market or cash positions is a bad idea now. It’s your cash. You earned it. You can decide to not fully participate in a clearly directionless, and dangerous, stock market environment now.
The alternative is to sit back and watch your company 401(k) account value disintegrate. Why on earth would you ever do that?
Your company 401(k) money market has almost no volatility. Over the last few months, it has become an even more attractive investment idea as short-term interest rates rise.
Would you like to earn 2% to 2.5% with no risk or see the last several years of your stock and bond investment gains continue to fade away?
For the first time in many years, a company 401(k) retirement plan allocation to the money market account is the right investment management strategy now.
Your 2018 year-to-date investment gains are largely gone. Do you want to take a chance to lose some of your 2017 investment gains and company 401(k) retirement plan contributions as well?
You are the only person in your life you can make the necessary investment management strategy changes that will preserve the last several years of your stock and bond market gains. The level of your participation in this current round of stock market losses is completely voluntary.
Ric Lager
Lager & Company, Inc.
