Many of the new individual retirement plan investors I talk to don’t know what type of game they are playing with their 401(k) accounts.
The current stock market environment has been fueled by younger and inexperienced online traders who have invested their government stimulus checks in stocks. The good news is that these traders have bought many of the stocks that company 401(k) retirement plan mutual funds owned many years ago and much lower prices.
But here is the problem. The individual stocks owned—directly or in a mutual fund—may be the same. But the investment objectives of an online trader are vastly different than just about any profile of individual company 401(k) retirement plan participant.
All individual company 401(k) retirement plan participants want to “make money” and grow their retirement nest egg. But there are some 401(k) investors who are content with their current near all-time high retirement plan account balances.
These individual company 401(k) retirement plan participants tend to be older and closer to retirement. Sure, they want to grow their 401(k)’s along with the rising stock markets.
But their primary investment objective is not to lose a meaningful amount of money in their 401(k). At this stage of their working career, a repeat of the last great stock market decline of 2008-2009 would be life-changing now and retirement plan changing in a few years.
Figure out which game you are playing now with your company 401(k) retirement plan account. You may own the same stocks. But understand your level of risk when the economic and stock market environments change.
Know the stock market game you are playing. You don’t have to play the same game as other stock market investors. Their investment performance outcomes don’t have to be yours.
Ric Lager
Lager & Company, Inc.
