“In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.”
Theodore Roosevelt
Individual company 401(k) retirement plan participants do not react to changes in stock market risk levels when necessary. The reason is that they do not know how much it costs them.
There is always a cost to a “buy-and-hold” company 401(k) investment management strategy. More precisely, it is really a “buy-and-hope” investment management strategy. Let us analyze and quantify this issue more.
Here is a list of reasons why individual company 401(k) retirement plan participants do not pay close attention to their retirement nest egg.
- “I am too busy”
- “I don’t know what I am doing”
- “Everything will turn out fine in the end”
Excuses cost tens of thousands of dollars of 401(k) retirement plan contributions and earnings.
Right now, you own one or more of the worst possible mutual funds on your default company 401(k) menu. These mutual funds lagged in investment performance when the stock markets went up. The bond mutual funds lagged in investment performance when interest rates were falling.
Recently, the opposite is true. When the stock markets drop, these same mutual funds drop in value more. And your bond mutual funds are losing value due to the continued rise in interest rates.
Here is your company 401(k) investment management problem now. You are taking 100% of the risks of investing in the stock and bond markets. You are not 100% rewarded the investment performance associated with that risk.
A large part of your company 401(k) account may be invested in the wrong mutual funds.
Doing nothing has cost you money riding the stock market elevator up. On the way down, your 401(k) principal risks are greater. “Buy-and-hold” is really a “do nothing” company 401(k) investment management strategy.
Consider the fact you may have made the wrong company 401(k) mutual fund choices. So, why do you continue to own those mutual funds?
Preserve the last several years of stock and bond market investment gains. Preserve your personal 401(k) and company-matching contributions over the same period.
Learn from your past company 401(k) mutual fund choice mistakes. Take the time to improve your company 401(k) retirement plan mutual fund choices now and in the future.
Look for independent, third-party, fiduciary level analysis of your current company 401(k) mutual funds. Answer the “what do I buy?” question.
The cost of doing nothing is an expensive lesson. You can improve your company 401(k) retirement plan investment management behaviors.
Ric Lager
Lager & Company, Inc.
