I read a great article last weekend by James Clear about Vilfredo Pareto and the Pareto Principle or the 80/20 Rule.
The consistent application of this Rule can have a profound impact on the long-term investment results in your company 401(k) retirement plan account.
Remember that a mutual fund is just a collection of the same size and style of stocks. The mutual fund manager makes a bet on the future investment returns of those stocks in a given stock market environment.
When the U.S. stock markets go up, not all mutual funds go up at the same rate. Some mutual funds outperform and some mutual funds lag. The key is to know which company 401(k) retirement plan mutual funds fall into each group.
Stock markets cycles changes every few months or years. The size and style of mutual funds that has worked recently, will not necessary be the best place to be invested over the next couple of years.
I am not promoting stock market timing. Instead, I want to make you aware of the investment management technology that is available today to improve your company 401(k) retirement plan mutual fund decisions.
All of the mutual fund companies on your company 401(k) retirement plan menu are competing for your retirement investment dollars. What investment management strategy are you currently using to make your mutual fund choices?
The age-old company 401(k) retirement plan investment management question of “what do I buy?” can be found in only a small number of mutual funds available to you.
The lowest annual cost and best-performing mutual funds should get your hard-earned retirement dollars. That small handful of mutual funds should be the ones only that you should ever own.
Independent, third-party investment advice from a registered investment advisor can simplify a sometimes overwhelming list of company 401(k) retirement plan mutual fund options.
Ric Lager
Lager & Company, Inc.
