Article written by me on my Golden Valley Patch Blog on August 11, 2011.
On July 22, the S&P 500 closed at 1,345, up almost 7 percent for the 2011 year-to-date. As of the market’s close on Wednesday, the S&P 500 was off nearly 11 percent for the 2011 year-to-date.
Said another way, 401(k) account investment return elevator has gone up, and then back down, almost 18 percent in less than three weeks. That much rise and fall in valuation over such a short period of time is truly historic.
For the sake of the preservation of your company retirement plan principal, you have to make some investment decisions now. Remember that during the last two great stock market declines (from 2000-02 and from 2007-09), the S&P 500 dropped 49 percent and 57 percent respectively from its highs.
It took 21 months to reach a stock market bottom in 2009, and it took 17 months to reach a stock market bottom in 2009. This current stock market decline may have more to go on the downside.
What to do now?
First, log into your company retirement plan online Website. If you don’t remember your log in, password, PIN, or ID, then call the company retirement provider’s 800 phone number and ask to “reset” you company retirement plan account access information.
You can find the phone number for your company retirement plan provider on your most recent quarterly retirement plan account statement or on their Website.
Second, get a complete list of every mutual fund option you currently own on the company retirement plan menu. At this point you are not concerned about ALL the mutual fund options available to you in the company retirement plan. You just want to make sure that you know what you own NOW.
Third, sell the worst-performing mutual funds that you currently own, and place the proceeds in the safety of the money market account in your company retirement plan menu. Only maintain the level of stock market exposure now that you are comfortable with.
The upcoming bottom of this stock market cycle has the opportunity to dramatically improve your company retirement plan account investment performance. To do so, you have to preserve as much of your company retirement plan account principal as you can now, and have that money to reinvest in the best mutual funds available on your company retirement plan menu when the stock market finds the next bottom.
Now is the time to make that money available.
Ric Lager
Lager & Company, Inc.
