Most people are not in the market for a company 401(k) retirement plan account investment advisor.
This is frustrating to me. But I completely understand.
Company 401(k) investors are making much progress building their retirement nest egg. The stock markets are up. Interest rates are down. Personal and company-matching contributions add up each year.
There is little chance your 401(k) account is not larger now than a handful of years ago.
“Buy-and-hold” 401(k) investing inertia is a powerful force of human nature.
I am challenged every business day to shine a light on the financial costs of “doing nothing” with 401(k) investment management decisions. I must bring to the mental front burner the financial costs of owning the wrong company 401(k) mutual funds.
Sure, the mutual funds you own now in your 401(k) have increased in value over the last few years. Other mutual fund on your default company 401(k) mutual fund menu have performed better.
You own 401(k) mutual fund X. You should have owned mutual fund Y instead. So, how much money has that cost you over the last few years?
That is the cost of 401(k) investment management inaction.
Let us look at the other side of selecting company 401(k) mutual funds.
Human beings fear losing money more than they appreciate making money. That is a psychological fact. The professional term for that state of mind is loss aversion.
My 401(k) investment advice clients have a 401(k) principal preservation plan in place now. They have identified the dollar amount or percentage of 401(k) principal they are willing to lose going forward.
How are you managing the stock and bond market risk in your company 401(k) account now?
Ric Lager
Lager & Company, Inc.
