The stock and bond market risk levels have changed. You have seen the headlines. Even if you don’t pay attention every day.
Take a good look at the mutual funds you own now in your 401(k). The annual fees and expenses first.
Are you receiving the investment returns you are paying for?
Next, look at the annual investment performance. Did the mutual fund you own fall in value at a faster rate than the popular stock market averages lately?
How about this year-to-date? Did the mutual fund you own go up in value equal to or greater than the same popular stock market averages?
It is not likely all your current 401(k) mutual funds will pass these tests. But there is one last test.
Would you buy that same 401(k) mutual fund now?
If you can’t find a reason for buying that mutual fund now, then why continue to hold it?
You wouldn’t buy your 401(k) mutual fund at the current price. Why do you add personal and company-matching 401(k) contributions to the same mutual fund?
Sometimes you own the wrong 401(k) mutual fund. It doesn’t make you a bad person. Be honest with yourself. Make the necessary 401(k) investment management adjustments. Because the stock and bond market risk levels have changed.
Sell the worst company 401(k) mutual fund you own now. Place the proceeds in the safety of the money market account.
Set a “stop loss” if the stock market decline continues. Figure out what percentage of your 401(k) account value you are willing to risk going forward. If your 401(k) account value falls below that level, sell another poor 401(k) mutual fund. And place the proceeds in the money market account.
Have some money to spend in your 401(k) when the stock market is “on sale.” To buy the best 401(k) mutual funds available to you at that time.
The worse 401(k) investment management decision is to “buy and hold.” To continue to lose retirement plan account principal value.
Full participation in the next great stock market crash is silly. Don’t make the same 401(k) investment management mistakes you have made in the past.
Logical, disciplined and organized 401(k) stop loss rules. To protect your retirement plan principal. In the early stages of large stock market or bond market losses.
Ric Lager
Lager & Company, Inc.
There is no need to continue to guess with your 401(k) mutual funds. All you need is a second opinion. You deserve it.
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