Because your 401k account is growing more and more important to you, the roller coaster swings in the stock market really frustrate the hell out of you. You have worked hard, and focused on managing your career, not your 401k. Now must you focus on managing your 401k too? So what do you do with your 401(k)?
I’ve heard many say their 401k is an out-of-control pool of money. They have no guidance, no information and are too damn busy to monitor this on a daily — or even monthly — basis.
But this 401k account is the money you will need to retire on. Pensions and social security may not be guaranteed to be there down the road. I meet a lot of folks who are hoping the market is rallying when it is time to retire. Otherwise, they are screwed in big trouble.
My 401(k): How Do You Get This Money Under Control?
Your day to day responsibilities at work do not include reviewing the mutual fund choices in your 401k at work.
You’ve called the “Help Desk” for more information about the investment choices in your 401k, and find lots of young, helpful, cheery people. The person you won’t meet… the one who is willing to say “you dunce, get OUT of that fund before it’s too late!”
You have asked:
- Your broker,
401k Help Center: Not Always Helpful
- Your financial adviser,
- The folks on the toll free line …for guidance.
- And you’ve tried managing this money on your own.
My 401k: Why can’t the Help Desk actually… “Help”?
The help desk will not help you because:
They either work at a call-center. Five minutes later they may (conceivably) be answering calls for a pest control company. Or may not even be in the same country as you.
You may be lucky enough to be speaking with a representative from the company, someone who may actually hold a securities license. But they don’t know you — or your situation, how much help will they actually be? Will they say “Oh no, you didn’t invest in THAT fund, did you?”
Here is the Big Problem: The Call Center guy is *prohibited* from offering investment advice.
Isn’t that the dumbest thing you have ever heard? But it is true. Yet they continue to boast “if you need help, just call.” What many 401k investors do not know is that the help line is limited to only discussing the choices available to you in the 401k plan, and help you make a transaction between funds. No advice!
Lovely, right?
So the people on the company 401k “help line” cannot “help me” with the “help” I need the most?
Right. The folks at the other end of the line are either unlicensed employees of a brokerage firm (or licensed employees of a brokerage firm). Unable to take the fiduciary responsibility of providing investment advice.
My 401-k: Can my broker/financial planner help me?
It’s possible. But just suppose: you meet with your planner or broker once or twice a year to review. Then, what happens if the markets change right after we meet? What if the money in my 401k account is neck-deep in emerging market funds, and all hell breaks loose on the other side of the globe? Or what if we have put everything into bonds and interest rates begin to climb?
It would be nice to think your broker or financial planner will call you.
Nice, yes. Just probably not realistic. Why? Because your broker or financial planner is busy trying to get his clients money (where he/she gets PAID) out of harm’s way first. He or she maybe even moving your other investments outside your 401k account. Wouldn’t you want to be one of the first people alerted, instead of an after-thought?
Managing your 401k account is not an easy task. Investing your 401k is not something to be handled part-time. Asking an investment advisor for help with your 401k is a great way to start getting control of your retirement account.
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Back On Offense
by Thomas Mullooly on January 12, 2010
Just what the heck does that mean…”back on offense?”
When I refer to “offense” and “defense” I mean which team currently controls the momentum of the market.
If the defensive team is on the field, then “supply” is in control. If the offensive team is on the field, then “demand” is in control. When the market is on defense, news can be interpreted as either “no news” or “bad news.” Meaning “surprises” (good and bad) usually bring lower prices. Nearly everything can become a reason to sell.
When the offensive team is on the field, “demand” is in control of the football. We don’t know how long we’ll have the ball. It could be “3 and out” or it could be a sustained drive culminating in a touchdown. We don’t know the outcome.
But we know the plays to run when which side is in control.
See, a lot of folks (in my line of work) just run “offensive” plays, all the time. Yes, ALL the time!
And when the things don’t work out, they lament “well, right now the market is bad.”
What kind of _____ answer is that?
I’ve got a fiduciary O-B-L-I-G-A-T-I-O-N to my clients to make sure we invest this money prudently. If we are on defense, the first play in my playbook is to STOP buying. There is an entirely different set of plays I run whether we are on offense or defense.
You should know the market can go UP even when we are on defense. Or markets can just hang around doing nothing. Defense means the risk of losing money is greater.
Here’s an example: in this recent defensive period, the Dow Jones climbed to their highs for the year, but most individual stocks — and most sectors — pulled back and stalled. You probably noticed in the 4th quarter that your accounts stayed flat, while the Dow moved up. Most stocks and most sectors pulled back to the middle of their trading band. So we didn’t get hurt during this defensive period.
Ok, for this time around…defense was on the field and didn’t give much yardage. But we can spend more time talking about defense later.
For the present time, we are back on offense.
Which means the chance of making money is better now than in the recent period (when we were on defense). Yes, the market can (and does, sometimes) go down while on offense. But the odds of making money in the market improves when on offense.
Some areas will out-perform others. My work keeps us in those areas. But the tone on offense is a rising tide. And a rising tide lifts all boats in the harbor…good and bad.
So a lot of lousy investments may go up when we are on offense. When the football goes into defensive hands, the lousy investments will be exposed. Warren Buffet said “It’s only when the tide goes out that you learn who’s been swimming naked.”
We have the football. Let’s get to work.
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