You Need a 401(k) Strategy Now

Determine your stock market risk now.

The buy-and-hold strategy is by far the most popular investment management strategy for the majority of Minnesota company 401(k) retirement plan participants. I don’t find many individual company retirement plan participants who have the investment experience or courage to manage their individual company retirement plan account any other way.

The U.S. stock markets historically go through periods of time when a passive investment management strategy is punished.  In a few short weeks, months or years of stock market gains can vanish. Most company 401(k) retirement plan participants have gone through a severe stock market correction at least once in their working lifetime.

No one can ever forecast the next direction of U.S. stocks.  But that acknowledgement should never be an excuse for a company 401(k) account participant to not pay attention to a change in the current stock market environment.

Since mid October, the U.S. stock markets have stopped going up and have begun a slow decline.  The technical analysis tools that I have learned to use over the last 28 years as an investment advisor are now showing that many more professional investors are sellers of stocks than buyers of stocks.

Company earnings targets and rosy sales forecasts don’t mean much anymore. Neither do professional investment advisor egos and biases. It can be very expensive investment lesson for individual stock market investors to argue with the current direction of the U.S. stock markets. 

Now is a great time to think about a much more conservative investment strategy for your individual company retirement plan account. Make sure that you know the current make up of each mutual fund that you own in your company retirement plan account.

The U.S. stock markets had a good first ten months of 2012.  That fact should be reflected in your current company retirement plan account balance. The risk that you took buying-and-holding U.S. stocks so far this year has been rewarded.

Unfortunately, wealth accumulation strategies never work all the time.  There comes a time with any stock market investment when an individual investor has to make a decision to preserve stock market gains, and to set comfortable stop losses on all stock market positions.

Most likely, the wealth accumulation phase of the most recent U.S. stock market cycle has passed.  Now is the time for the wealth preservation stage of the U.S. stock market cycle.

I realize that for most individual company retirement plan participants investment management decisions like the one I describe are unnatural.  Who has the time to analyze what they own, take partial profits, and decide how much risk stock market they want to take going forward?

That same thinking is why the majority of individual company retirement plan participants don’t have great investment success managing their company 401(k) retirement plan accounts.

You can’t ever afford to remain fully invested during a potential stock market decline. Take the time to make the necessary investment management decisions in order to feel good about your individual company 401(k) investment returns by year end 2012.

Ric Lager
Lager & Company, Inc

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