For years, we have been experiencing natural disasters all over the world; earthquakes, tsunamis, tornados, and flooding … just to name a few.
I was pondering these events and I realized a similarity between storms and investing. There are constant changes in the weather, just as there are constant changes in the stock markets. There is a science to both.
By studying the science that causes the changes in weather, a professional weather forecaster can make a forecast to help you prepare for a sunny day or a potential storm.
Similarly, by studying the science behind the changes in the worldwide and U.S. economy and financial markets, a financial professional can make a market forecast to help you take advantage of opportunities. Or, prepare for a potential financial storm.
It is very possible that you could get caught in another stock market down pour without an umbrella. Even more serious would be the need for you to use a life raft to seek higher ground.
The most common company 401(k) investment management strategy is to “buy and hold.” If you are several years away from retirement (in this day and age, who on earth would know that information now), that same investment management strategy is “buy and hope.”
Each investment management strategy is like sitting in a hurricane hoping that you won’t get wet. A timelier example would be a state opening bars and restaurants too soon, and having to close them again.
To ensure that you are prepared for any more dramatic economic or stock market changes later this year, take the time now to ask yourself the following questions:
Do you have a financial advisor who is actively managing your company 401(k) retirement plan account? A current investment advisor you work with who looks at your company 401(k) statements once a year does not count as a “yes.”
Have you reviewed your company 401(k) mutual fund holdings since then end of last year? Maybe you did not get the e-mail. The entire world has changed in the last few months. That includes your 401(k).
Have you realized the time to invest for capital appreciation in your 401(k) is likely coming to an end? Do you know how to change your investment management strategy to principal preservation in your 401(k)?
You need to prepare for the financial “weather” ahead of you. There is no need to ride out another stock market storm and hope you company 401(k) account does not get wet. Or drowned.
Ric Lager
Lager & Company, Inc.
