By now, your favorite NFL team has started their season. College and high school teams are weeks away from playing. Fall is in the air and football is top-of-mind for even casual football fans now.
A basic knowledge of football can provide a very important company 401(k) retirement plan account investment management strategy concept.
Think for a moment about your favorite football team. How would they do if the coaches decided to play only the offensive team on the field for every play?
They might do well when they had possession of the ball. But when the opposing team had the ball, your team would be scored on at will. The final score in this scenario would be embarrassing. Your favorite team would have a hard time winning any games.
This is the same problem most stock market investors have when it comes to the investment management decisions required in their company 401(k) account. They don’t know which stock market team to put on the field at any given time.
“Buy-and-hold” 401(k) investors don’t know if they need to play offense or defense with their retirement account savings.
There is a time to have the offensive team on the field. That is when the stock market is supporting higher prices. When you have the ball, your job is to take as much money in your company 401(k) retirement plan account as possible. Your investment management focus needs to be on wealth accumulation strategies.
Occasionally, there are stock market cycles that require you to have the defensive team on the field. The stock market is trying to take money away from you. Your company 401(k) retirement plan account principal needs to be protected. The best investment management strategy here is to play defense.
With COVID-19, working from home, layoffs, closures, foreclosures, college quarantines, protests, wildfires, tropical storms, a Presidential election and a toilet paper shortage, would you say the U.S. stock market is in an offensive or defensive environment going forward?
Don’t manage your stock market risk like you have in the past. The risks to your recent all-time high company 401(k) retirement plan account balances are too great.
The U.S. economic and stock market conditions have changed. There are credible forecasts that even more drastic changes are likely going forward. These changing conditions require you to give consideration to the following questions.
“Should I remain 100% invested going forward, and hope that the U.S. stock markets rise even more?”
“Should I take some profits close to these all-time highs, and preserve at least a part of the last several years of my stock and bond market investment gains?”
“How much stock and bond market investment risk am I comfortable taking over the next few months based on the current economic, social, and political climate?
If just one of your answers to these questions causes concern regarding your current company 401(k) principal preservation strategy, then it might be time for you to put your defense on the field.
Ric Lager
Lager & Company, Inc.
