In the last 16 years, two of the most popular U.S. stock market broad averages have declined 50% or more on two separate occasions.
From March 2000 to October 2002, the NASDAQ Composite Index lost 78% of its value. The S&P 500 Index lost 57% of its value from October 2007 to March 2009.
The Minnesota company that provides the stock market mutual funds on your company 401(k) retirement plan menu will never remind you of these historical stock market facts. They also hope that an independent investment advisor like me will not remind you. Too bad for them.
The financial media experts don’t know if the U. S. stock markets will keep falling. Those same experts also don’t know how great the current decline will be. Those facts don’t stop them from trying to predict and sell their products.
The NASDAQ is down about 12% and the S&P 500 is down about 8% so far in 2016. The scary part is that the U.S. stock markets go down a little bit before they go down a lot of bit.
The most important company 401(k) retirement plan investment management strategy now is to know which mutual funds you currently own. The individual company 401(k) retirement plan participants that I meet with always have at least two or three mutual funds that they should not continue to own in a declining stock market.
Sell those mutual funds and place the proceeds in to the safety of your company 401(k) retirement plan money market account. Preserving your retirement plan principal now is the most important thing to do.
The next thing to do in to make sure that your current company 401(k) retirement plan contributions are set to go into the money market option. There is no sense “throwing good money after bad” into the worst mutual funds on your company 401(k) retirement plan menu.
Your money market balance will come in handy when the U.S. economy and stock markets are done with their current downward direction.
Now is not the time to “ride it out.” Now is the time to preserve what you have. And to have as much money as possible to buy U.S. stocks when the decline is over.
Ric Lager
Lager & Company, Inc.
