September is surely the best month of the entire year for football fans. High school, college, and NFL seasons have finally begun.
Football fans at every level pay close attention to the weekly rankings of their favorite teams. All levels of football rank their teams during the regular season. At the end of the season, there are playoffs and the crowning of a champion. Participation in fantasy sport leagues grows each season.
Have you ever thought about using the same ranking system to the default mutual fund options in your company 401(k) retirement plan account? It’s easy. Just select a fantasy team out of the best mutual fund options found on your company 401(k) retirement plan menu.
First, those mutual funds need to be ranked. Next, the rankings would be updated periodically based upon recent results. The two most important characteristics to rank would be investment performance and annual fees.
It’s fine to own expensive mutual funds. Just make sure that their investment performance is more than worth how much it costs to own that fund each year.
Past leadership is often a positive indication of future outperformance. In the investment management world, that leadership concept is called Relative Strength ranking.
Today’s investment management technology allows individual company 401(k) retirement plan participants to access mutual fund relative strength rankings. There are clear mutual fund “winners” that are outperforming and “losers” that you want to avoid.
The only way to know for sure that you own the best mutual fund options available on your company 401(k) retirement plan menu is an independent, third-party database.
Relative Strength ranking identifies both the winners and the losers on your default company 401(k) retirement plan menu. There is no more guessing at what to own or why to own it. The Relative Strength ranking “is what it is.”
This ranking provides a head-to-head measurement of how each of your company 401(k) mutual funds compares to all your other mutual fund options. Relative Strength provides a clear win/loss record for each company 401(k) mutual fund.
Relative Strength ranking your company 401(k) retirement plan mutual funds can improve your investment management decisions over the long-term.
You don’t need to turn your company 401(k) retirement plan account into an active trading account. But wouldn’t it be nice to know which mutual funds are working and which ones are not?
Ric Lager
Lager & Company, Inc.
