401(k) investing can feel good when things are going well. Remember how you felt when you opened your year-end 2021 statement? Your 401(k) account value was never higher.
A few months later, the exact opposite feeling. 401(k) investors might not have found the courage to even open their June 30, 2022, account statement.
Investing in your 401(k) account is always a risky proposition. Admit it. Most of your current 401(k) mutual fund choices are guesses. On the specific mutual fund. And the dollar amount invested in each mutual fund.
Rising interest rates. Volatile stock prices. How much risk should you take now in your 401(k) account?
The correct answer is never the same for each 401(k) investor. Here is the best answer that applies. You never want to worry about your 401(k) principal.
Do not believe the financial media talking heads automatic response. For them, it is always a good day to be 100% invested. And remain invested.
I call BS. No 401(k) investor likes to lose giant amounts of 401(k) principal. Ever. Older 401(k) investors even more. They have lost 30-50% of their 401(k) account values a couple of times over their working career.
Stock market losses are part of the long-term 401(k) investment management process. But where does it say you are automatically enrolled in losing one-half of your retirement plan savings every few years?
I am not talking about trying to “time the market.” I am talking about a logical, disciplined, and organized investment management strategy. With the highest degree of strategy to preserve your 401(k) principal.
In the early stages of a meaningful stock market decline. Or historical rise in interest rates. Much like the current stock market and economic environment.
Currently, the stock markets are down again. And interest rates are rising. Both events lower the value of your 401(k) mutual funds.
And let us not forget about inflation. Inflation has changed the investment management game for your 401(k).
The same growth mutual funds that went straight up in value for 13 years in a row are no longer working. You need to update your 401(k) mutual fund selections.
Investors have not had to deal with current levels of inflation in over 40 years. A generation of 401(k) investors is new to the current mutual fund picking environment.
Not all stocks will provide a “get back to even” investment environment. Value or Growth? Mid or Small Cap? International? You must know the best type of 401(k) mutual fund to own going forward.
Bond mutual funds are the best place to invest now in your 401(k).
You do not have to guess. Your 401(k) mutual fund ranked by annual cost and investment performance. The best ones will stand out by a mile.
Comment below if you would like to find out the best mutual funds to own on your default 401(k) menu.
Ric Lager
Lager & Company, Inc.
