Last week, an individual 401(k) advice prospect told me:
“My 401(k) is protected because I rebalance.”
I’ve heard versions of that sentence for over 41 years.
All the way back to 2008–2009.
When individual 401(k) investors lost over 50% of their account value.
Stick to the plan. Rebalance. Your 401(k) will “come back.”
Someone has to tell you.
It might as well be me.
Rebalancing does not protect your 401(k).
When the geopolitical, economic, and stock market risks.
All change at the same time.
It never has.
It never will.
I don’t care how many financial media talking heads tell you it does.
Or how many online articles you read.
Even if you use your library card and read economic theory textbooks.
Any rebalancing date you set in advance.
Has not one thing to do with the real world now.
The whole stock market is falling together at the same time.
Like it did 2008.
Here’s the truth about the myth of rebalancing:
Rebalancing doesn’t reduce 401(k) stock market losses.
It reshuffles them.
It turns small manageable 401(k) losses into historic large 401(k) losses.
Rebalance and wait is not a 401(k) stock market risk management strategy.
Real 401(k) principal protection begins when you limit your stock market risk.
A pre-set dollar amount or percentage of your 401(k).
A “stop loss” level to do something.
If your 401(k) account value drops to that level.
Interested in a real exchange of ideas to protect your 401(k) now?
Let’s get a connection started here.
P.S. 401(k) stock market risk looks different when you have a protection plan.
