Admit it. You hate watching your company 401(k) retirement plan account. Based on my 22-plus year of providing investment advice to retirement plan participants on their default 401(k) mutual fund menus, I have a great deal of confidence in the following three observations.
First, reviewing your company 401(k) statement on a regular basis is not fun. I agree. My free time is also spent on others things I like to do.
But my company 401(k) account is “a lot of money” no matter how much money you think is a lot of money. There is no way on earth I am not going to pay attention to the stock and bond market risk levels of my 401(k).
Periodic reviews of your stock and bond mutual funds can adjust your risk levels based on the current economic and stock market environments. Apply your own COVID-19 life lessons here. Things can change quickly. And many of those changes can directly affect your company 401(k) retirement plan account value.
Second, you think you already know where your company 401(k) money is being invested. Good for you if you do. Not many individual 401(k) investors can honestly make that statement.
But, here’s the truth. You really don’t know. Unless you have recently reviewed the top ten stock holdings in each company 401(k) mutual fund you own, you don’t have a clue about how much stock market risk you are taking now.
Alphabet, Amazon, Facebook, & Tesla are an overwhelming 38% of the total S&P 500 capitalization. That’s 38% of your S&P 500 index mutual fund invested in just four stocks.
And your current company 401(k) “growth” mutual fund holdings are very similar. You are most likely “up to your eyeballs” in just a few stocks in your 401(k) mutual funds.
Worse, those few stocks are in only one primary stock market sector; technology.
Third, there is a very good chance that you really don’t want to know more about your company 401(k) account. I get that. Why do you need to pay attention when the account value goes up all the time?
This company 401(k) state of mind is a common one. Other things in life have been much more important over the last few months.
Here is your 401(k) investment management decision question: Do you want to change?
Do you want to continue to own expensive company 401(k) mutual funds that lag the stock market benchmark averages?
Do you care about the fact that you very likely left tens of thousands of dollars on the table owning the wrong 401(k) mutual fund options over the last few years?
What steps have you taken to preserve your 401(k) principal with interest rates rising unexpectedly over the last few months?
If you don’t care, I probably can’t convince you otherwise. If you do care, what do you have to lose by watching your 401(k) more closely beginning now?
Ric Lager
Lager & Company, Inc.
