I wrote this article on September 30, 2011 on my Golden Valley Patch Blog.
For the last five-plus years, the S&P 500 index has had a negative investment return. There have been upswings in this stock market benchmark over the last few years, but those upswings have not lasted very long. The long-term trend has been down.
The vast majority of Minnesota company 401(k) plan mutual funds that I review are highly correlated to the investment performance of the S&P 500 index. Because of the negative investment returns in this index over the last several years, there has not been much chance to make any money in your company retirement plan owning these S&P 500 clone mutual funds.
The more important investment management strategy over the last few years has been to manage your periodic stock market losses. By managing stock market losses, I mean the preservation of the principal value in your company retirement plan account, along with the safety of your ongoing individual and company contributions.
The stock market has not gone up, and stayed up, for several reasons. The U.S. economy, unemployment, housing prices and real estate values have suffered over the last few years.
The financial media and their mutual fund company advertisers will always tell you that it is a great time to invest your money. Stocks are always “cheap,” the outlook is always “positive,” and the U.S. economy will always “rebound.”
In addition, the “buy-and-hold” and “pie chart” asset allocation propaganda message from the majority of investment professionals has not helped company retirement plan participants preserve or grow their account values over the last few years.
Taking steps to protect your company retirement plan account principal when the stock market is clearly going down has been the best investment you would have made over the last several years.
This month of September 2011 is another example of the importance of learning to have the confidence to manage your company retirement plan account in accordance with what is really going on in the stock markets.
Ric Lager
Lager & Company, Inc
