Returning Christmas Gifts? Don't Forget to Exchange Your 401(k) Funds

Just as sure as Christmas comes every year, so does the handful of Christmas gifts you receive that you surely want to take back or exchange.

Despite the best intentions of your friends, family, neighbors and co-workers, there are always a handful of holiday gifts that leave you underwhelmed and confused.

This might even be the year when you can’t figure out what in the world was Santa thinking about in giving you a few of the Christmas gifts you received.

With regular Christmas gifts, you have to be careful to keep your gift receipt, don’t open the package, and decide if you want a different gift.  You also need to know if you want store credit or a refund.     

With the mutual funds in your company 401(k) retirement plan, you don’t have to take the time to make any of those decisions. All you need to do is to pull out your most recent company retirement plan account statement.

In 2011, your company 401(k) retirement plan account surely left for owning some mutual fund gifts what you may want to refund now. These mutual funds are ones that you now wish that you had not owned since last January. 

In 2011, any “global” or “international” mutual fund that you own in your company retirement plan menu was probably your biggest investment disaster this year.

Close behind those investment losers in 2011 were several of the “target term” or “target date” mutual funds.  These are the mutual funds with a future year in the name of the mutual fund.  As an example, a target term mutual fund would have the name of the “XYZ Company 2030 Fund.”

These mutual funds are supposed to manage your company retirement plan account money with the right mixture of stocks and bonds based on the year in which you probably will retire. The stock market risk in these mutual funds is supposed to be managed with that retirement date in mind.

Nothing is that easy in stock market investing.  Not even at Christmas time.

Depending on the mixture of international and U.S. stocks, it would have been easy in 2011 to lose 5-10% of your company retirement plan account value in a mutual fund with a year in the name of the mutual fund title.

Now that you are in the “exchanging frame of mind,” it would be profitable for you to exchange some of the worst mutual funds you currently own in your company retirement plan account.

Next, put the “refund” you get from the sale of the mutual fund into the safety of the money market account now.  That way, you will have some money available for the “after Christmas sales” that are sure to come both at your favorite retail store and in the U.S. stock markets.

There is one last thing to remember when you exchange your unwanted mutual funds in your company 401(k) retirement plan account. There is never a restocking fee.

Ric Lager
Lager & Company, Inc.