What a difference a few weeks can make.
During the last nine-plus years of stock market advances, my conversations with individual company 401(k) investment advice clients were focused on building their company 401(k) retirement plan account balances.
In the last few weeks, the conversations with these same clients have distinctly changed. The focus is no long on long-term growth. Instead, the main topic is, “How do we protect my 401(k)?”
The risks associated with stock and bond market investing in your company 401(k) retirement plan mutual funds has to be managed now. Most likely, the U.S. stock and bond market are no longer in a “set-it-and-forget-it” environment.
Individual investors should be very fearful now of a continued rise in interest rates and a stock market downturn. Common sense needs to be the largest part of how you currently manage your company 401(k) retirement plan account balance.
The severity of the last bear market in 2008-2009 has not been forgotten. The S&P 500 fell by more than 50%. It took many individual investors more than five years to recover the losses in their 401(k)’s.
All company 401(k) retirement plan mutual funds have participated in the rising stock market and falling interest rates over the last several years. Do you know which of those mutual funds you currently own is going to be the best option for the preservation of the last several years of stock and bond market gains?
The same question can be asked about the last several years of individual company 401(k) contributions and company-matching contributions. How will the mutual funds you currently own protect your 401(k) from rising interest rates and falling stock prices?
Stock and bond market investments have risks of principal loss. Going forward, your best investment management strategy may be emphasis on the preservation of your company 401(k) retirement plan principal instead of long-term growth.
The “buy-and-hope” investment management strategy will leave individual company 401(k) retirement plan account investors at the most risk. “Diversification” will fail individual investors again. The same goes for all the other financial industry marketing slogans like “dollar cost averaging” and “rebalancing.”
The only person in the world who actually cares about your company 401(k) retirement plan account is you. If you are concerned about the safety of that account going forward, you have some timely decisions to make now.
If you are unsure, don’t think you know what you are doing, or don’t have the time, get some help. Your company 401(k) retirement plan account is at risk.
Ric Lager
Lager & Company, Inc.
