Most Minnesota company 401(k) retirement plan participants make their own investment management decisions. I don’t exactly know the science behind this fact. But I do know that is just the way it is.
I have always taken the opposite approach. I don’t exam my own eyes. I don’t fix my own car. I don’t do my own taxes.
I pay an experienced professional for their service. These professionals help me make the most important decisions in my life. Health, personal safety, and my money are very important to me and my family.
If you make your own company 401(k) retirement plan decisions, give some thought to your best answer to the following list of questions.
What are you investment management qualifications to manage your company 401(k) retirement plan account?
Your company 401(k) retirement plan account has a limited menu of options. You can invest in stocks, bonds, or the money market. But you need to know what combination of those three investments makes the most sense based on the investment risk you are willing to take.
How good are you at picking mutual funds? You can’t pick a mutual fund based on its name. And you surely can’t think that every mutual fund available to you is a good company 401(k) retirement plan investment.
You have to know the difference between Value and Growth stocks. You have to know the difference between Large, Mid, and Small Cap stocks.
And then there are the bonds. There are Long, Medium, or Short term bonds. There are Treasury, Government, Corporate or Foreign bonds. I analyze mutual funds for a living every day and I get confused sometimes.
Can you determine the best asset classes to be invested?
You don’t want to own foreign stocks when the US stock market is hot. You don’t want to own bonds when interest rates are rising. And you especially don’t want to own small cap stocks when large cap stocks are the place to be.
In investment management, there are a lot of things that you don’t want to do. Those things are many times more important that what other people tell you to do.
What is your plan when the stock market begins to drop? What is your plan when interest rates start to rise?
These stock and bond market events separate the pretenders from the contenders. You have to have a plan that you can execute when you read, hear, and see that you are losing money every day in your company 401(k) retirement plan account.
Very few individual investors that I have met can remain calm and cool when the stock market is down in a big way. If you can do it, my hat is off to you.
If you can’t, you should look for an investment advisor who can provide you with a logical and organized investment management game plan for your company 401(k) retirement plan account.
Ric Lager
Lager & Company, Inc.
