The first rounds of NFL training camp roster cuts have been made. NCAA and high school football camps are open. Football season will be here soon.
The following football analogy helps my clients preserve their company 401(k) retirement plan account principal. Even a casual football fan understands the importance of knowing what team needs to be on the field.
The U.S. stock market indices are near all-time highs. Your June 2021 company 401(k) account statement was very likely an all-time high account value. The set-it-and-forget it investment management strategy has had a good long run.
At some point, the U.S. stock markets will fumble, intercept, or “turn over” the football. The last several years of stock market upward momentum will stop. The next change of possession of stock market direction will likely bring pain and sorrow.
A strong defense will be required to preserve the last several years of stock market gains along with your individual and company-matching 401(k) contributions. Full participation in the next great stock market decline is completely optional.
Instead of sitting back and taking another round of historic stock market losses, you can fight back. Your company 401(k) retirement plan principal preservation investment management strategy should begin now.
The buy-and-hold investment management strategy is promoted by the mutual fund companies that manage your company 401(k) retirement plan mutual funds. When you buy, the mutual fund companies hold. The combination preserves the maximum amount of annual investment management fees you pay.
Your company 401(k) retirement plan mutual funds don’t care much about annual investment performance. They care the most about always hanging on to your money.
Your favorite football team can’t ignore the loss of the football. The team changes players when they don’t have the football. If that team kept the offense on the field when the other team had the ball, they would be scored on at will.
The same analogy goes for remaining 100% invested in your company 401(k) retirement plan mutual funds. When the stock market football will change possessions. Your company 401(k) investment management strategy can’t completely ignore the early stages of the next great stock market correction.
You don’t have to run out and sell everything today. Instead, think about putting a principal preservation investment management game plan in place. If the stock market football is taken away, don’t let your company 401(k) retirement plan principal get taken away too.
Your favorite football team knows that playing defense is part of the game. The same common sense applies to managing your company 401(k) retirement plan account.
Ric Lager
Lager & Company, Inc.
