The U.S. stock markets have traded at all-time highs this summer. Interest rates are slightly higher than all-time lows. Individual company 401(k) retirement plan participants have every reason to be happy.
Why are the majority of individual company 401(k) retirement plan participants I meet with as nervous as I can remember? My guess is that the collective gut feeling is that envision a summer re-run of a familiar movie plot.
I have not paid attention to my company 401(k) retirement plan account for years. But I still see all-time quarterly statement record highs. What follows is another great stock and bond market correction. The movie title would be “The Summer of 2008-2009 Part II.”
Deep down, investment investors know that their inattention to a retirement plan risk-management strategy has been rewarded for the last six-plus years. Everything has gone up in value. All of the most widely accepted investment management strategies have worked.
In the stock market, as in life, nothing lasts forever. Stock market losses are brutal. No amount of consolation can help a company 401(k) investor after a big stock market losses or interest rate hike.
Don’t believe the myth that recent stock and bond market investment gains will go on forever. This myth is especially dangerous when you have not had to pay close attention to your company 401(k) retirement plan account for the last several years.
Now is the time to start thinking about a stock market risk management game plan. You need to know exactly what steps are going to be taken not if, but when, the next great stock market decline takes place.
And take the time to fully understand how rising interest rates will affect the value of your bond mutual funds. Years worth of bond mutual fund investment gains can be wiped out by a handful of Federal Reserve interest rates hikes.
Stocks markets will go down. Interest rates eventually rise. Don’t be in the group of individual company 401(k) retirement plan participants who follow the stock and bond markets over the cliff again. You have seen this movie before.
Ric Lager
Lager & Company, Inc.
