Neighbor News
Low Cost Does Not Mean Low Risk
Costs are a big part of your company 401(k) retirement plan account.
With two teen-age kids, there is no shortage of opportunities for me to interact with local parents. There is school, sports, or social events on my calendar every week.
Many times during parent conversations, the topic of investing comes up. I know where all the parents work; and they know what I do for a living. Most parent conversations offer me the opportunity to answer an investment related question or concern.
Many parents today are “do-it-yourself” investment managers. They set up online brokerage accounts for their household investing, and buy-and-hold no load mutual funds or ETF’s.
The low-cost model of investing is a good one. I follow the same low cost strategy for my clients who pay for my investment advice.
I remind my parent friends of one big investment management mistake that I see being made over and over again. That is, the idea that low cost investments equal low risk investments.
Never, ever is that the case. Regardless of stock, bonds, mutual funds, ETF’s or individual company 401(k) retirement plan accounts. Low cost investments still need to be managed when the economic and market conditions change.
Interest rates are beginning to rise. The stock markets have struggled to maintain their multi-year price levels. Your May accounts statements will reflect lower account values than earlier this year.
Saving investment management costs is great. But don’t give away those cost savings during the next stock or bond market correction. The investment management goal is low costs, competitive investment returns, and principal preservation.
