In Memory of the Last Great Stock Market Decline


Buy-and-hold investing is a relevant option for all individual investors. But you have to be very aware of the risk involved in that investment management strategy.

The last great stock market decline was from the July of 2008 to March 2009. Many individual company 401k) retirement plan balances lost up to 40% of their market value during that time period.

Let me put a number on that amount of money lost.

Let’s say that you had a $500,000 Minnesota company 401(k) retirement plan account value on July 1, 2008. Your company 401(k) retirement plan account value on March 31, 2009 would have been around $300,000.

This is not an extreme example. I have sat in front of multiple individual company 401(k) retirement plan participants who lost similar dollar amounts.

Regardless of your age or company 401(k) retirement plan balance, no individual company 401(k) retirement plan participant can afford to sit through that kind of loss.

If you consider yourself to be part of the buy-and-hold group, then you need to be made aware of the retirement plan principal losses that are possible during stock market declines. You need some sort of stock market risk management principal preservation strategy.

There are only two options.

First, you can do it yourself. Some people have remodeled their homes. Some people fix their own cars. Some people do their own tax returns.

I don’t fall into any of those groups. I let the professionals give me professional advice based upon their education and experience. That leads me to the second option.

The second option is to develop a relationship with a third-party independent investment advisor. An in-depth analysis of your company 401(k) retirement plan account is well within the services of an investment advisor.

The financial media has tried to convince individual investors that there was nothing you could have done in 2008-2009. They are making the same statements now about the current stock market decline.

That is not true.

Stock markets always go down after long and steady advances. The stock market has not had a meaningful correction for over five years. It is long overdue.

Ric Lager
Lager & Company, Inc.

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