The large financial services companies spend tens of millions of advertising dollars every year. Their main message is always the Big Three of investment management advice–asset allocation, diversification, and rebalancing.
The end result is that most individual company 401(k) retirement plan participants own too many mutual funds in their company 401(k) retirement plan account.
The financial services companies make the most money when company 401(k) retirement plan participants remain 100% invested at all times. Why on earth would they spend their advertising dollars on any other messages?
There is no need to own six, eight, or ten mutual funds. The trick is to know the right mutual funds in your company 401(k) account.
Asset allocation and rebalancing don’t reduce your stock market investment risk. The more mutual funds you own the lower your investment returns.
This Thanksgiving take a few minutes to log on to the summary page of your company 401(k) retirement plan web site. Look for the page that summarizes the 2017 year-to-date investment returns. Compare the year-to-date investment returns of the mutual funds you own now versus the other mutual fund options available to you.
The current stock market levels are near all-time highs. Current interest rates are near all-time lows. Common sense is many times a good investment management strategy.
Do you really think that the next big move in either the U.S. stock market or interest rates will be in your favor as an individual company 401(k) retirement plan participant?
You currently own at least one or two mutual funds that are clearly lagging the investment performance of other mutual funds on your company 401(k) retirement plan menu. You are taking all the stock market risk but not getting the best stock market investment returns.
Now is a good time to shoot those mutual fund turkeys. Place the proceeds of those sales in the safety of your company 401(k) retirement plan money market account.
Selling your worst performing mutual funds now preserves your year-to-date 2017 stock market gains. And it provides a money market balance to spend the next time that stock and bond prices are “on sale.”
No, this is not timing the stock markets or rising interest rates. Instead, it gets rid of the worst mutual funds you currently own. And provides money to spend on the best mutual fund options available to you at lower prices.
Ric Lager
Lager & Company, Inc.
