Individual company 401(k) retirement plan participants own way too much U.S. stocks now. I met with a 60 year old executive just last week who is currently 95% invested in U.S stocks in his company 401(k) retirement plan account.
The last six-plus years of stock market advance has rescued individual company 401(k) retirement plan balances. Finally most individual investors have recovered their pre March 2009 company 401(k) retirement plan balances.
That is the good news.
The bad news is that individual company 401(k) retirement plan investors have been lulled to sleep. Few company 401(k) retirement plan participants remember the 45-55% stock market losses they suffered through just a few years ago.
Losing one-half of your money is not fun. Repeating that event seven years closer to a planned retirement would be a disaster.
The best way to avoid another life-changing stock market loss is ask yourself this simple investment management question. How much stock market risk am I willing to take in my company 401(k) retirement plan account now?
Major economies around the world have begun to slow down. Interest rates can’t stay close to zero forever. At some point no economic growth and rising interest rates will slowdown or stop the U.S. stock market.
The best investment management strategy you can have is to preserve the last few years of your stock market gains. Minimize the downside stock market risk in your company 401(k) retirement plan account.
Those colorful little pie charts on your company 401(k) retirement plan provider web site won’t preserve your stock market investments. Diversification will not help you when interest rates rise. Buy-and-hold turns into buy-and-hope when the stock market goes down and interest rates rise.
I am not predicting a stock market disaster. I am just reminding you to have a plan in place to preserve your company 401(k) retirement plan principal. Don’t let U.S. stock and bond market history repeat itself in your company 401(k) retirement plan account.
Ric Lager
Lager & Company, Inc.
