Face your 401(k) facts
No matter how much attention you pay to your 401(k) mutual funds.
The rising stock market has largely been driven by speculation.
Bitcoin with ticker symbols.
In most cases, corporate earnings have slowed.
Economic growth has slowed. Interest rates and inflation remain stubbornly high.
Yet the stock market remains close to all-time highs.
U.S. stock market history is clear.
Company earnings and economic conditions matter at some point.
And that point is usually a meaningful stock market correction.
Along with potentially significant 401(k) losses.
I am not saying a stock market correction is happening now. Or will happen soon.
I am saying a 401(k) principal protection strategy would be a good idea.
Especially if you have never considered that strategy before.
My individual 401(k) investment advice clients use a “stop loss.”
A dollar amount or percentage of their 401(k) account value.
If the stock market drops dramatically, they “do something” in their 401(k).
They sell all or part of their worst 401(k) mutual funds.
The mutual fund laggards to the stock market averages.
Here’s why…
To preserve the last few years of 401(k) stock market gains.
To preserve the last few years of personal 401(k) contributions.
To preserve the last few years of company-matching 401(k) contributions.
And the most important reason to set a 401(k0 “stop loss”:
To raise cash in their 401(k) money market account.
To buy better 401(k) mutual funds. At upcoming “sale” prices.
Too often, individual 401(k) investors fail to protect their principal.
Every few years from a predictable stock market decline.
Growing your 401(k) account value is not always the primary investment strategy.
Sometimes principal preservation should be the primary investment strategy.
If you lose money every few years in your 401(k). You never really get ahead.
Because you go backwards. As much or more as you go forwards.
If you are a few years from retirement, maybe you can take more 401(k) risk.
If not, a 401(k) risk management strategy should include a “stop loss.”
Interested in a 401(k) principal preservation strategy?
Then let’s connect on LinkedIn. Or comment below and I can respond.
P.S. There are common sense solutions to preserving your 401(k) principal.
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