In December, you will see several articles about the direction of the U.S. economy in 2023. All written by experts. Who have advanced degrees and years of experience.
These experts could plan your 401(k) investment management strategy with their convictions. But you need to pay closer attention.
The reality is that no one knows what will happen in the economy next year. The same for the direction of U.S. interest rates and U.S. stock markets.
Do not fall into a familiar trap. Do not invest your 401(k) in a way that places a bet on a single direction of the economy, interest rates, or stock markets.
Think about the current football season. Both college and professional. There have been many upsets. Each week. The bets handicapped by the professionals were wrong.
When you place a wrong bet in your 401(k) the stakes are high. You risk the last several years of stock and bond market gains. And personal and company-matching contributions.
Instead, develop a 401(k) investment management strategy based on Relative Strength.
Relative Strength is a ranking of your default 401(k) mutual funds. The ranking identifies the past investment performance of each 401(k) mutual fund. Ranked against their mutual fund peer group. And ranked against the popular stock market benchmarks.
Again, allow me to use a football analogy. Think about how you pick your fantasy football team each week. You use rankings. Updated with vital information from the most recent games. Specific to each player position.
Each week the player statistics change. And the rankings. That is why you adjust your fantasy football picks each week.
Let me be clear. I am in no way advocating to jockey around your 401(k) mutual fund each week. It would make sense for you to view the Relative Strength rankings. Like once each calendar quarter.
Relative Strength is part of the study of technical analysis. Few investment professionals use this investment management discipline. Even fewer can apply it to a default 401(k) menu of mutual funds.
You might enjoy a Relative Strength ranking of your default 401k) mutual funds. Send me a note in the comments below. We can take the communication offline. To keep your existing 401(k) holding confidential.
Predictions are helpful. But up-to-date rankings are better. Adjust your 401(k) mutual funds to actual stock and bond market events. And leave the predictions for the financial media.
Ric Lager
Lager & Company, Inc.
