This Time Is NOT Different!

“‘This time it’s different’ are the four most expensive words in the investing language.”  -Sir John Templeton

Now is an excellent time to learn from your past company 401(k) retirement plan and retirement account investment management mistakes.  The professionals who watch the U.S. economy and stock markets for a living every day have enormous influence over the direction of your investments. When these professionals begin to sell U.S. stocks, you absolutely need to be paying close attention.  A dramatic change in stock market direction can happen quickly.  An individual investor can lose a decade’s worth of stock market investment gains in a few weeks.

At the end of May 2013, the S&P 500 was up over 14% for the year-to-date. Those investment gains for 2013 in your investment accounts are now at risk.  There are no guarantees in the stock market.  When stock prices begin to decline from historically high price levels, common sense needs to become your best investment management decision.

The investment community buzzwords like ‘auto-enrollment’, ‘diversification’, and ‘pie charts’ all mean nothing when the emotions and the greed that control the U.S. stock markets take over.  The best diversified portfolio still took a beating when the last bear market took over.  Remember when the financial media told individual investors to buy-and-hold all the way down to the bottom of the last great stock market decline from July 2008 to March 2009?

The only 100% guaranteed investment management decision to preserve your hard-earned stock market gains is to sell part of your stock market holdings and place the proceeds into the money market account option on your company 401(k) retirement plan menu or investment account.  If you believe what I just wrote, then someone (either you or a professional investment advisor) needs to be watching that account RIGHT NOW and making the decision:  Do I stay IN… or do I get OUT?

Now this is where it gets a bit dicey for the 401(k) investor.  Most of you do NOT have the option to move that 401(k) to a professional unless you are retired, terminated, or 59.5 years old.  You are responsible for the long-term investment results of your individual company 401(k) retirement plan account.  The people that manage the mutual funds you own in you your company retirement plan account only know how to buy-and-hold.  The U.S. government does not have any responsibility to preserve the value of your 401(k).  You will never get a government bailout in your retirement years because you 401(k) fell apart on you.

Right now, take a good look at how much risk you are taking being 100% invested in the U.S. stock markets in your individual company 401(k) retirement plan account.  If you are not comfortable with that risk, sell a part of your individual company retirement plan account holdings and preserve the principal.  The most important investment management decision you may make now is to preserve as much of this year’s investment gains as you can.

Cheers,

Ed Downey