Doing Nothing is Not a 401(k) Option

I would be the first one to admit that Minnesota summer to-do lists are endless. Very difficult choices have to be made on a weekly basis. Family, friend, and work obligations multiply in the summer.

Most individual investors don’t spend a great deal of time watching their company 401(k) retirement plan accounts. The main reason is that they don’t think of themselves as great investors.

There is an endless supply of finance behavior studies that conclude doing nothing is can be a sound investment management strategy. Many of those same studies describe behaviors that individuals engage in that get in the way of investment management decision making.

One concept is called the self-perception theory. Individual investors draw conclusions about who they are from the behaviors that they engage in. If you don’t spend a great deal of time managing your investments, you must not think of yourself as a great investment manager.

There are times when it is very easy to make money in the stock market. It has been that time since March 9, 2009. You could have easily done nothing on your stock market investments since that date and enjoyed great long-term investment returns.

Eventually, there are times not to lose money in the stock market. Now may be the beginning of one of those times. At a minimum, now is closer to one of those times.

You can still maintain some level of stock market exposure now. But your probably should not be 100% invested in U.S. stocks. Give some serious consideration to preserving some of your last few years of company 401(k) retirement plan stock market gains.

Ric Lager
Lager & Company, Inc.