This Thanksgiving, Shoot the Turkeys in Your 401(k)


The large financial services companies spend tens of millions of advertising dollars every year. Their main message is always the Big Three investment management advice–asset allocation, diversification, and rebalancing.

The end result is that most individual company 401(k) retirement plan participants own too many mutual funds in their company 401(k) retirement plan account.

The financial services companies make the most money when company 401(k) retirement plan participants remain 100% invested at all times. Why on earth would they spend their advertising dollars on any other messages?

There is no need to own six, eight, or ten mutual funds. The trick is to know the right mutual funds in your company 401(k) account.

You don’t reduce your investment risk by owning more mutual funds. All you do is to lower your investment returns.

This Thanksgiving take a few minutes to review the year-to-date investment performance of your company 401(k) retirement plan mutual fund options.

Log on to the summary page of your company 401(k) retirement plan web site.  Look for the page that summarizes the 2015 year-to-date investment returns. Compare the year-to-date investment returns of the mutual funds you own now versus the other mutual fund options available to you.

The current stock market levels are near all-time highs. As long as the stock market continues to rise, stick with the best mutual funds that you own now.

You may own some lagging mutual funds on your company 401(k) retirement plan menu. You are taking all the stock market risk but not getting the best stock market investment returns. Now is a good time to sell those investment performance turkeys.

Selling the worst performing mutual funds now has two big benefits.  You preserve your 2015 stock market gains.  And you have money to reinvest in better mutual fund options after the next stock market pullback.

Shoot any company 401(k) mutual fund turkeys you own now. Then give some careful thought about what mutual funds to own next.

Ric Lager
Lager & Company, Inc.

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