September is surely the best month of the entire year for football fans. High school, college, and NFL seasons all begin this month.
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 type of ranking system with 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. You pick the best football players for your fantasy team. Pick the best mutual funds for your company 401(k).
First, those mutual funds need to be ranked. The two most important investment management decisions to choose any mutual fund are investment performance and annual fees.
Many of my individual company 401(k) investment advice clients have owned the most expensive mutual funds available to them for years. That’s because their single mutual fund investment performance continues to be the best on their default company 401(k) retirement plan menu.
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 investment performance leadership is often a positive indication of future outperformance. In the investment management world, that leadership concept is called Relative Strength.
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.”
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.”
Relative Strength provides a head-to-head comparison 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.
Can you see how the Relative Strength ranking your company 401(k) retirement plan mutual funds can improve your investment management decisions over the long-term?
Investment management of your company 401(k) mutual funds is nothing more than owing the highest ranked mutual funds available to you. Think of it as picking the best players for your fantasy football team.
Your company 401(k) retirement plan provider will never share important investment performance ranking information with you. These plan providers just want you to remain fully invested in ANY mutual fund all the time.
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 to get the information from an independent, third-party database.
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 have the ranking information form an independent database in order to know which mutual funds are working and which ones are not?
Ric Lager
Lager & Company, Inc.
