By a very wide margin, “buy-and-hold” is the most popular individual company 401(k) retirement plan participant investment management strategy.
However, you need to be made completely aware of the fact that there are two different styles of the buy-and-hold strategy. Most individual investors don’t realize that the buy-and-hold investment management strategy needs two very critical parts to take place in order to be a successful long-term investment strategy.
First, an individual investor needs to take a very long-term approach to managing his or her company 401(k) retirement plan account. Unfortunately, human emotions are not tied to the long-term. Ever.
When you first looked at your year-end 2018 company 401(k) retirement plan statement, were you thinking about the long-term?
Second, the buy-and-hold investment management strategy needs diversification among several of your company 401(k) retirement plan mutual fund options. This required is diversification among different asset classes. You need to own U.S. stocks, bonds, International stocks, and money market.
Diversification is not how individual investors think. Most individual company 401(k) retirement plan participants own one major asset class. That is, U.S. stocks. Rarely do I ever see a company 401(k) quarterly statement that includes bonds. Even less likely, is any degree of exposure to International stocks.
With no long-term approach and less asset class diversification, the likelihood of success from a buy-and-hold investment management strategy goes out the window.
Here is a much better buy-and-hold company 401(k) retirement plan account investment management strategy that is likely to both preserve and grow your retirement savings in any stock and bond market condition.
This buy-and-hold strategy has you only owning the top handful of best-available mutual funds on your default company 401(k) retirement plan menu. You could own two, three or even five mutual funds. Your choices would be clear and easy to understand. Just don’t own any “dog” mutual funds in your 401(k).
The only resource required is an independent, third-party mutual fund ranking system. This could be provided by your investment advisor. Or you may need to find one. You can’t trust your company 401(k) retirement plan sponsor (your company) or your provider (Schwab, Fidelity, etc.) for this information.
When you stick to the mutual fund rankings, you will completely remove the dangerous emotions that will always surround your investment management decisions. By default, you will interject a professional and disciplined investment selection and risk-management process into the management of your 401(k).
March Madness starts this week. Are you going to pick many 16 seeds to beat number 1 seeds in the first round? Then why are you still owning lower seeded company 401(k) retirement plan mutual funds?
Improving your buy-and hold company 401(k) retirement plan investment management strategy will change your “guessing what to own” to “knowing what to own.”
Ric Lager
Lager & Company, Inc.
