This Thanksgiving will be memorable. As a holiday as close to back to normal as was possible over the last few years.
No matter how you choose to celebrate. You will have at least a few minutes alone over the long weekend to devote to your finances. Here is an idea to profit from the isolation.
Review your current company 401(k) retirement plan holdings. Open your September 30, 2022, quarterly paper statement. Better yet, log in to your company 401(k) retirement plan account website.
Find the column on your quarterly statement that lists past investment returns. You will notice a huge gap in past investment performance. On one or more of your current 401(k) mutual funds.
You are taking all the risk of investing in the stock markets. But you are not getting your fair share of investment returns. Here is how to close that gap.
Lately, the opposite investment return scenario is taking place. You own 401(k) mutual funds that are losing principal at a faster rate than the stock market averages. This gap is even wider.
This is the most important investment management decision to make in your 401(k) now. And in to 2023.
The U.S. stock markets are down big for the year. Interest rates have risen to historical levels. You own one or more 401(k) mutual funds that need your attention.
Sell those bad mutual funds you own as soon as possible. And place the proceeds in the safety of the money market.
That is right, shoot the turkey mutual funds you currently own. Call the company 401(k) retirement plan provider 800 number. Or sell the mutual funds online.
There is no need to own four, six, or more company 401(k) retirement plan mutual funds. Owning more mutual funds does not reduce your stock and bond market investment risk. All you do is to lower your investment returns. And increase your annual 401(k) expenses.
Even worse, your 401(k) “break even” number gets even higher.
There is only a small handful of great 401(k) mutual funds. Regardless of the default 401(k0 mutual fund menu. I am willing to bet the same set of circumstances exists on your default 401(k) mutual fund menu.
Selling the worst performing 401(k) mutual fund now will give you a money market balance. The money you will need to reinvest when the current stock market decline arrives.
Do you enjoy the sale prices at your favorite store? Great. What do you have to have to take advantage of those sale prices?
You must have the money to spend when the things you want to buy go on sale. Even better in your 401(k), you want money to spend when mutual fund prices are low.
Some good can come from the stock market decline of 2022. And the rise in interest rates. That is, you can upgrade the quality of the 401(k) mutual funds you choose to own going forward.
The best way to “get back to even” in your 401(k) starts with the sale of your bad 401(k) mutual funds. Proceeds into the money market account. And dollar cost averaging into the best 401(k) mutual funds available to you.
Ric Lager
Lager & Company, Inc.
