The U.S. stock markets suffered through an historic few days of volatility last week. The majority of individual company 401(k) retirement plan participants were too busy with their daily lives to stop and realize what was going on.
Alert: stock market volatility is another Wall Street jargon term. The translation for stock market volatility is that you just lost one hell of a lot of money in your company 401(k) retirement plan account.
A few company 401(k) retirement plan sponsors provide a robo advisor service for individual company 401(k) retirement plan participants. Robo advisors are the latest investment advice gimmick.
Robo advisors gather data points from several sources in or to provide investment advice based upon your age and tolerance for investment risk. That information is gathered into a set of algorithms that pick which mutual funds you should own in your 401(k).
Have you ever wondered why the target date mutual fund options on your default company 401(k) retirement plan menu are all provided by the same mutual fund company?
Coincidence? Not hardly. The algorithms can easy skew investment recommendations into the most expensive target date mutual funds versus the lower cost index mutual funds.
All my individual company 401(k) advice clients wanted to know last week was, “What does this stock market decline mean in my company 401(k)?” I would be very surprised if the majority of my clients could explain the correct use of an algorithm.
The internet is full of general information about stock market performance and future predictions. Individual investors can hardly ever find stock market investment management information that is specifically related to their investment concerns.
You have to talk to a real-life person in order to be able to understand how the company 401(k) retirement plan mutual funds that you own now are holding up in another historic stock market decline.
A set of math calculations can’t help an individual company 401(k) retirement plan investor understand the game plan for the preservation of retirement plan principal in the face of record stock market declines.
I hear that algorithms are a good way to pick company 401(k) retirement plan mutual funds. But they can’t provide stock market investment management decisions that help you the most when you really need them.
Ric Lager
Lager & Company, Inc.
