Play golf at Brookview? Use the same tools to manage your 401(k)

It is that time of year again. Even people who don’t really enjoy golf are going to play over the next few summer months. Some people play golf because they love to; other people play golf because they have to.

The same tools that improve your golf game can also make you a more successful Minnesota company 401(k) retirement plan investor. Here are the three most important golf concepts that also apply to managing your 401(k) retirement plan account.

Evaluating out "Lie"

The U.S. stock markets are back near their all-time highs. The other major stock markets around the world are well below their highs. Is business in the U.S. really that much better than anywhere else in the world?

The price-to-earnings ratio of the S&P 500 is now over 17. That is the most expensive multiple since September 2009. You don’t have to be a fundamental analyst to realize that U.S. stocks are very expensive right now and that a meaningful downside move would not be a big surprise.

Pulling a Club

Most likely, you currently own a handful of mutual funds in your company 401(k) retirement plan account that have lagged in investment performance. Said another way, you guessed wrong on “what to buy.”

With the high stock market levels, now is the time to make sure that you don’t let your multi-year stock market gains disappear. Taking profits on your worst performing mutual funds before the next great stock market decline is a good investment management strategy.

Have you ever heard of dollar cost averaging? Selling your worst mutual funds near all-time highs is where the money comes from to reinvest in better mutual funds at lower prices. The process takes time but it makes common sense.

Executing Your Shot

Distance to the pin, wind direction, and how aggressive you want to play the hole are all part of golf strategy. The investment management of your company 401(k) retirement plan should include an awareness of the current stage of the U.S. economic cycle. And how many years you are away from your desired retirement date.

I am sure that your March 31st quarterly company 401(k) retirement plan statement looked great. A rising stock market and near record low interest rates can make any individual investor look like Warren Buffet.

It is not what you make in the stock and bond markets that counts. It is how much that you keep of those investment gains that secures your company 401(k) retirement plan account value.

Enjoy your rounds of golf this spring. The first time you get rained out of your game, go home and use the same tools to analyze the mutual funds in your company 401(k) retirement plan account menu.

Ric Lager
Lager & Company, Inc.