A few months ago, your 401(k) statement printed a record high dollar value. That was then. We are in a much different stock and bond market environment now.
What steps are you taking now to preserve your 401(k) principal?
For the last several years, you never had to pay attention to your 401(k) mutual funds. Stocks, bonds, or any combination of the two. Stocks went up. Interest rates went down.
How much time and effort did you ever put in picking your 401(k) mutual funds? A co-worker, neighbor, or the guy in front of you in line at Costco. Each one could have picked your 401(k) mutual funds over the last few years.
The days of “buy-and-hold” investment management strategy with your retirement savings are gone. At least for the near future.
No more. Any mutual funds you own now in your 401(k) must reflect the reality of the stock and bond markets. You might want to add in the geopolitical, economic, and public health realities as well.
You cannot “set-it-and-forget-it” in your 410(k) anymore. You need to take active steps to preserve your 401(k) principal now.
Start by identifying your retirement plan investment goals. Look at the worst-case scenario first. Can you afford to lose 10, 20, or even 30% of your 401(k) account value?
If you do not think that is possible, you can stop reading this blog post now. You can get back to watching the newest season of your favorite show on Netflix.
Netflix is down in price over 65% for 2022 year-to-date as I write this. Any growth mutual fund you own now in your 401(k) is up to their eyeballs in this stock.
It is too late to figure out “what to buy” in your 401(k). It is not too late to preserve that last several years of your 401(k) investment gains. And your personal and company-matching contributions.
Stock markets, interest rates, and geopolitical environments. All working against the growth of your 401(k) now. Combined, these factors do not provide for the preservation of 401(k) principal.
Let us face it. If you decide to sell any 401(k) mutual fund now it could go straight up in value for the next several years. On the other side, you could continue to own that mutual fund. And it could drop 30% before the Labor Day holiday.
That is how stock and bond market investing works. You have not had to make these 401(k) investment management decisions for the last several years.
Now you do. The stock markets and bond markets demand your attention now.
Set your greed aside. At least for a little while. The stock and bond markets are no longer supporting your long-term efforts to grow your 401(k) account.
Stocks are falling. The Federal Reserve intends to raise interest rates later this year. Several times.
Make 401(k) investment management decisions now to preserve your retirement savings.
Preserve 401(k) principal. You want a large retirement nest egg in a few years. This is the most important investment management decision now.
Ric Lager
Lager & Company, Inc.
