U.S. stock market prices have more than doubled the value of the S&P 500 over the last five years. It has been about 2 1/2 years since stock prices fell significantly.
Just about every Minnesota stock market investor that I talk to thinks that the good old days of guaranteed stock market returns every year are back. It makes me nervous every time I read or hear similar comments.
When the stock market gets too high for comfort, some company 401(k) retirement plan participants choose to buy bond mutual funds.
But interest rates are near all-time record lows. When interest rates rise, bond mutual fund prices fall. The last two times that the Federal Reserve ended its current round of interest rate support– in 2010 and 2011 — the S&P 500 declined 16% and 19%, respectively.
At this point in both the stock and bond market cycle, there is no safe place to hide in your company 401(k) retirement plan account. Think about putting into place an investment management strategy that protects the last few years of your stock and bond market investment gains.
The next big moves in the stock and bond markets may not lead to higher prices. That is the reason to consider taking some of your company 401(k) retirement plan account profits off the table.
This may be an especially good investment management strategy for a company 401(k) retirement plan participant who is about 10 to 15 years away from their desired retirement date. The same thought should be given to those individual investors who are already retired.
Ric Lager
Lager & Company, Inc.
