Every Minnesota investor has multiple parts of their life. And each of these parts competes for their time and attention.
Family and work dominate the attention of most people. Personal details struggle to get done in a timely manner. Personal financial matters are usually last on the list.
The biggest loser is in the game of attention to details is the company 401(k) retirement plan account.
Many company 401(k) retirement plan participants put off making important investment management decisions for one simple reason. They live in fear of making a bad decision.
Investments in the wrong company 401(k) retirement plan mutual funds means that retirement savings will not grow. A fully invested 401(k) account means that retirement savings will go backwards every few years.
Most individual company 401(k) retirement plan participants make no decisions at all. That way they can’t make investment management mistakes.
No decision is still a decision. In most cases, no investment management decision has the same investment performance results as a bad decision.
Every few years, the stock markets run up to all-time high price levels. Shortly after, the stock markets go through an historic stock market correction.
Most individual company 401(k) retirement plan participants ride the stock market up. Then they ride it right back down again.
I help my clients make better investment management decisions regarding their company 401(k) retirement plan account. One of the first things I help them understand is that they cannot control the direction of the stock markets.
The direction of the stock markets is unknown. The only thing that is known is how you are going to react when the stock markets begin to go down.
Take the time to understand how much investment risk you are taking by owning stocks in your company 401(k) retirement plan account. Next, adjust the amount of risk you are taking to the current stock market environment.
The U.S. stock markets are no longer a buy-and-hold investment option.
You need to make periodic investment management decisions in regard to your company 401(k) retirement plan account. Those investment management decisions fall into two categories.
First, you need to always be aware of the amount of risk you are taking with your retirement plan investments. When the stock market is trending higher, there is not much for you to do. When that trend changes, you need to make risk management decisions.
Second, you need to ask yourself the single most important investment management question. That question is, “Do you feel worse when the stock market goes up and you are not fully invested, or do you feel worse when the stock market goes down and you are fully invested?”
With the current stock markets near all-time highs, don’t be afraid to ask yourself these two questions.
Ric Lager
Lager & Company, Inc.
