I opened my first investment advice account for an individual company 401(k) investor in 1999. I have learned the two main elements for successful 401(k) investment management.
The first element is intelligence. 401(k) participants must take the time to understand their main menu of mutual fund options.
A complete understanding of annual costs comes first. Ranking of 401(k) mutual fund investment performance is next. The result is better 401(k) mutual fund decisions.
Most 401(k) investors follow the old standards of “buy-and-hold” and “diversification.” Following the heard is easier than making 401(k) mutual fund choices.
All the financial media propaganda in the world cannot help you grow and preserve your 401(k).
Smart people often fall into the psychological trap of always wanting to be in the right. They fear embarrassment more than they fear financial losses.
I know lots of smart people who are terrible stock market investors. Many long-time 401(k) advice clients of mine still do not know anything about the stock market. And many of them own seven-figure 401(k) accounts!
It is great to be smart. In company 401(k) account stock market investing, it is better to own great mutual funds.
The second element of a 401(k) retirement investment management strategy is to “know what you don’t know.” My 401(k) investment advice clients realize they need independent, third-party investment advice. They know that is the best way to get the most out of their 401(k) account.
Individual investors do not have the time or experience to manage their 401(k) account. They think the stock market always goes up; and they will retire before it goes down again in a big way.
I have been sifting through the haystack of company 401k) default mutual funds for over 23 years. There are no guarantees in the investment advice business.
But I am confident in the fact that I can find the handful of mutual funds you should own right now in your 401(k) account. Much better and faster than you can.
Experience counts for a lot. Sophistication with investment management technology counts for even more.
Even better, I get scared easily. I am that kind of investor. I do not have the stock market overconfidence that I see so often with younger company 401(k) investors.
Over the years, I have learned how to manage stock market risk in my own accounts. I help my 401(k) advice clients learn those same lessons without mistakes.
You move closer to your desired retirement date. This is the most important thing I have learned over the years.
It is not how much money you and your company contribute to your 401(k) that matters. And your stock and bond market investment returns are less important than you think.
What is your plan to preserve those contributions and investment returns in your 401(k)?
Ric Lager
Lager & Company, Inc.
