I’ve been providing investment advice to Minnesota company 401(k) retirement plan participants for 13 years. When the stock market goes up, my individual company retirement plan participant clients would do very well.
The quarterly company retirement plan statements ending on September 30th are on their way to company retirement plan participants right now. The retirement plan account values on those statements are sure to be at multi-year highs.
These are exactly the times that successful long-term investors think about the next big stock market move.
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When the stock markets fall from multi-year highs, most individual company retirement plan participants give back a good deal of their stock market profits. After several up-and-down stock market cycles, almost all investors saving for a secure retirement never “get ahead” in their company retirement plan account.
About 10 years ago, I made one simple adjustment to the investment advice that I provided to my clients. Since then, I have seen a huge improvement in their company retirement plan investment results.
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When the level of stock market risk increases, I advise my clients to place some of the money in their company retirement plan accounts in the money market account option in their company retirement plan account. This investment strategy allows them to protect part of their recent stock market gains.
For most of my individual company retirement plan participants, their number one investment objective is to preserve their company retirement plan account principal. Investment gains are nice, but “to keep what you have” is better.
Recently, the stock market has been configured to make money. During these times, even casual stock market investors have been able to make money owning stock mutual funds.
But when the stock market risk increases, your company retirement plan account investment strategy also needs to change. Trying to “buy-and-hold” a declining stock market environment is no way to save for a secure retirement.
Just as sure as the temperatures begin to fall this time of year, a stock market correction for the current highs is right around the corner.
As we enter the last few weeks of 2012, pay very close attention to the risk you are taking in your individual company retirement plan account.
So far this year, the investment gains have been great. Don’t give back all those gains, and more, by trying to “buy-and-hold” in a declining stock market.
