I have been providing investment advice to individual company 401(k) retirement plan participants for 18 years. Without question I know the following fact regarding individual investor behavior to be true.
My clients rarely get upset with company 401(k) retirement plan principal losses that are within their acceptable range of risk. Losses of 5-10% of their company 401(k) retirement plan account principal are acceptable.
Small losses are part of stock market investing and can be managed. This level of stock market losses can easily be made up in a few short years.
I help every one of my individual company 401(k) investment advice clients put a dollar value on the level of stock market losses they can endure. There is a stop loss percentage number based upon how much company 401(k) retirement plan principal loss my client is willing to take.
In most stock market environments, my client’s nominal stop losses will be less than the relative stock market losses on the popular indices like the S&P 500. My company 401(k) advice clients may lose 10%; but there is no chance they lose 45-50%.
My investment advice clients would never accept losing historic amounts of their company 401(k) retirement plan principal that will take them several years to recover.
Managing stock market losses should be part of your company 401(k) retirement plan investment management process. But you never hear or read about managing stock market losses from your company 401(k) retirement plan sponsor or mutual fund provider.
Every day is a great day to be 100% invested in the stock market according to every mutual fund manager who ever lived.
Hell, most professional investment advisors never talk about the possibility of stock market losses. When was the last time your current investment advisor asked you how much risk you are willing to take with your investments?
Company 401(k) retirement plan stock market risks can be managed. You can limit the percentage of your account value or specific dollar amounts that you can comfortably lose.
The current stock and bond market environments are exasperating for many individual company 401(k) retirement plan participants. There are smarter, better, and faster options available to you.
Talk with an independent, third-party, fiduciary level investment advisor who can you your review your current levels of company 401(k) retirement plan stock market risk. Then set the amount of dollar stock market losses you can live with.
Ric Lager
Lager & Company, Inc.
