One of the biggest misconceptions that individual company 401(k) retirement plan participants suffer from is that they belief that they need to guess at the stock and bond market tops and bottoms in order to be a successful long-term investor.
That is not true at all. No one can guess the direction of the stock market and interest rates consistently over the long term. Super computers using algorithms managed by really smart people can’t even do that. If they could, they would already have all the money in the world.
The majority of long-term investment management success comes from observing what the stock and bond markets are doing. Common sense observations are the best investment management strategy.
You don’t have to guess right at the top of the stock market cycle to “time the market” and sell. And you don’t have to get in at the bottom. All you really have to do is manage the middle of the eventual stock and bond market cycles.
The stock market moved to all-time highs in late September. Since October 3rd, many large U.S. companies have reported lower earnings for last quarter. More importantly, these companies have lower earnings estimates going forward into 2019.
The stock market’s message now is very simple. There are many more sellers than buyers. Like any good or service in that kind of economic environment, prices are going lower.
Interest rates and the effect on bond mutual fund prices are now telling you an equally grim story. The Federal Reserve has continued to raise interest rates. More importantly, they have all but promised to continue to raise interest rates multiple times next year.
In order to best protect your company 401(k) account, pay less attention to the non-stop financial media talking heads. Instead, listen to what stocks and bonds are telling you.
You don’t need to continue to allow falling stock prices and rising interest rates to continue to devastate the principal value of your company 401(k) retirement plan account.
The Target Term or Target Date mutual fund options that have gained popularity over the last few years on company 401(k) retirement plan menus are especially dangerous to own now. The “double whammy” of falling stock prices and rising interest rates leave no safe place to hide in these mutual funds.
The most likely best investment management strategy now for the preservation of your company 401(k) retirement plan principal is the safety of the money market or stable value account. There is no other safer investment option available.
The answer to how best to stop the further erosion of your company 401(k) retirement plan account is right in front of you. Listen to the message and take action.
Ric Lager
Lager & Company, Inc.
