It’s Time to Spring Clean Your 401(k)
We are now past Memorial Day.
Even if your local weather has not yet cooperated.
Warmer weather and sunny days are ahead.
Here’s a friendly Spring reminder.
Of your annual obligation to clean out your closet and your garage.
No order necessary.
Make sure to get to each one soon.
And clean out the piled up junk accumulated over the last few months.
With the stock and bond markets in constant turmoil.
The same Spring cleaning rationale applies to your 401(k).
Revisit the important 401(k) investment management concept.
Of selling your worst 401(k) mutual funds.
You likely own at least one or two 401(k) mutual funds.
With one or both of the following problems.
When the stock markets went up, the mutual fund lagged.
When the stock markets went down, the mutual fund dropped more.
With interest rates rising now.
You have the same problem with bond mutual funds.
Rising interest rates make bond prices fall.
And with that comes a drop in the value of bond mutual funds.
Especially 401(k) target date mutual funds.
“Buy-and-hold” has failed your 401(k) this Spring.
It might hurt your 401(k) even more over the Summer.
The best way to “Spring Clean” your 401(k)?
With a 401(k) “stop loss.”
A dollar amount or percentage of your 401(k) account value.
If your 401(k) falls to that level, you “do something.”
That means selling your worst 401(k) mutual funds.
Place the proceeds in the safety of your 401(k) money market account.
You will have money set aside to take full advantage.
Of the future stock and bond market “sale” at a later date.
It may take some time for the stock market volatility to subside.
No problem.
Lower cost and better performing 401(k) mutual fund await.
Ric Lager
P.S. Take a few minutes to look over your 401(k) soon.
My LinkedIn 401(k) advice newsletter can help.
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