Chances are that you have recently received your 2014 year-end company 401(k) retirement plan statement. Congratulations on the all-time highs in your retirement plan assets.
Now is a good time to pay close attention to the familiar disclaimers that covers the rear end of both your company retirement plan provider and your company retirement plan sponsor.
You probably know the disclaimer that I am talking about. It is the one that reads, “Past performance is not indicative of future returns.”
That statement completely describes the investment returns of calendar year 2014. It also perfectly describes the biggest investment management challenge going forward in calendar year 2015.
The mutual fund managers on your company 401(k) retirement plan menu can sell you nothing more than their most recent investment returns. Every day is a good day to be 100% invested in their mutual funds.
When you live and die on last year’s investment performance you run the risk of being at the mercy of next year’s investment performance. For most individual company 401(k) retirement plan participants, that is too big of a risk to take.
With the U.S. stock market close to all-time highs, you need to think about an investment management game plan for the next great stock market decline.
Strategic Asset Allocation, Modern Portfolio Theory, and Diversification are the investment management jargon that you want to run from. All of these investment management strategies ignore what is actually going on in the U.S. economy and stock markets.
The year of 2015 is shaping up to be even more volatile than the last few years in both the stock and bond markets. That means that individual company 401(k) retirement plan participants are going to have to be able to make investment management decisions in real time.
That also means that textbook based academic investment management theories are again likely to disappoint. So will financial advice industry marketing concepts.
Let go of last year’s stock market investment performance and all-time company 401(k) retirement plan account highs. The most important investment management decisions you need to make are coming up.
It is not how much money you can make in the stock market that is the important thing. The important thing is how much money you can keep of your stock market gains in the future.
Ric Lager
Lager & Company, Inc.
