Deciding which mutual fund gets your hard-earned 401(k) money is always a tough decision. The stock and market volatility now make it even more difficult.
Most 401(k) mutual funds lag the investment performance of the stock market averages. Even in a good stock market. You take all the risk of owning stocks. But you do not get all the rewards.
If you pick the wrong mutual fund in a bad stock market, you lose even more. A bad mutual fund may decrease in value at a faster rate in a downward stock market than the stock market averages. You lose more money.
What is the answer?
An independent, third-party, fiduciary ranking of your 401(k) menu of mutual funds.
The ranking is based upon the most important mutual fund elements. Annual cost. Past investment performance. And exposure to specific mutual fund asset classes.
The ranking will help you manage your stock and bond market risk. Mutual fund rankings are dynamic and real-time. There are no surprises if monitored.
Mutual fund analytic technology has progressed. For both professional and amateur investors. This technology improves all levels of 401(k) mutual fund selections. And risk management decisions along the way.
All 401(k) mutual funds are managed by a team of investment professionals. They have bet most of their mutual fund money on 15-20 stocks. You own that same bet in your 401(k).
Use the same mutual fund analytical tools as the investment professional use. That way, you can determine which 401(k) mutual funds are worth paying for.
You will never eliminate 100% of your stock market risk. The world is too unpredictable. And the benefits of some risk-taking are too valuable.
The purpose of 401(k) mutual fund rankings is to lower the stock market risk. And improve 401(k) mutual fund selections going forward.
Your 401(k) account will be protected from major stock market declines. It will also grow faster if your 401(k) is invested in the best mutual funds available to you.
401(k) mutual fund rankings strike the right balance. Principal preservation. Lower annual costs. Exposure to the best-performing asset classes.
401(k) mutual fund rankings are not perfect. But they can limit the 401(k) principal downside. And provide more exposure to stock market upside.
401(k) mutual fund rankings provide accountability. Most times a fiduciary investment advisor provides it. Not affiliate with your company 401(k) plan sponsor. Or your company 401(k) provider.
Last, 401(k) mutual fund rankings are based on logic, discipline, and common sense. Grounded in the best independent mutual fund data available. Provided with the highest levels of consistency and transparency.
Regardless of your level of investment management sophistication. Any individual 401(k) investor should appreciate these elements.
To answer the age-old 401(k) investment management question of, “what to buy.”
Ric Lager
Lager & Company, Inc.
I have spent the last several years trying to figure out the best way to share my 401(k) advice content. I have tried Twitter, Facebook, company web site, and LinkedIn Groups. I now realize nothing beats a well-crafted newsletter delivered to your inbox once a week. Sign-up here.
If you like the content, hit reply, and start a conversation. I can help you figure out your default 401(k) mutual fund menu.
