I wrote this article on April 17th, 2012 for my Golden Valley Patch Blog.
It never makes any difference what the “experts” think or say about the near-term direction of the stock markets. Always, the most important element that affects the value of your Minnesota company 401(k) account value is supply and demand.
For the last two weeks, there have been many more sellers of U.S. stocks than buyers of U.S. stocks. Despite the flurry of company earnings reports and economics statistics, the “big boys” in the stock market have been selling stocks lately.
If a long-overdue stock market correction does materialize soon, there are some basic investment management moves to make now that will dramatically improve the investment returns in your company 401(k) plan account.
The bottom of this current stock market cycle was the first week of October of 2011. Your company retirement plan account statement period ending on September 30, 2011 was probably the “low water” mark of your company retirement plan account value.
Using that September 30, 2011 statement as the baseline, analyze which mutual fund options you currently own in your company retirement plan account that have the worst investment returns since then.
The benchmark investment return to use is the S&P 500 Index. From September 30, 2011 to March 31, 2012 that index was up approximately 24.49%.
If you currently own any mutual fund option in your company retirement plan account that was up much less than that number over that period of time, you need to take the time now to make a decision as to why you need to own that mutual fund going forward.
The worst mutual funds you own now are likely to be the worst performers down in the next stock market correction. For that reason, it may be a good investment management idea now to sell those mutual funds and preserve your stock market gains since last October.
Remember, that the worst thing to do in the early stages of any stock market correction is to hope that this time your company 401(k) retirement plan account investment returns will be different.
Ric Lager
Lager & Company, Inc.
