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posted on 18 February 2016

The Real 401k Plan Manager

by Lance Roberts, Clarity Financial

As you will notice, I never advocate being 100% out of the market. However, I will recommend a market neutral strategy once a confirmed bear market trend is established. As I have discussed many times in the past, it is far too difficult to reverse course when the market changes from a negative back to a positive trend. Emotions keep us from taking the correct action. There are 4-steps to allocation changes based on 25% reduction increments. As noted in the chart above a 100% allocation level is equal to 60% stocks.

401k-Plan-Manager-012916

RISK-REDUCTION-MODEL

TIME TO RAISE MORE CASH

As I have repeatedly discussed over the last couple of weeks, the market has NOW BROKEN the long-term trend support. A change in TREND is critical and suggests that the bull market advance that began in 2009 is over. As shown in the chart above, the technical deterioration is significant.

As stated above, it is now time to raise cash levels and lower equity risk to the final level this coming week. The current market environment is NOT conducive to an overweight allocation to equity risk currently.

Remember, it is far easier to add capital back into the markets as opportunities become more visible, rather than trying to figure out how to make up previous losses.

If you need help after reading the alert; don't hesitate to contact me.

Current 401-k Allocation Model

The chart below shows the transition from a fully allocated 401k plan to the target allocation you want to work towards over the next week.

401k-AllocationModel-011516

The 401k plan allocation plan below follows the K.I.S.S. principal. By keeping the allocation extremely simplified it allows for better control of the allocation and a closer tracking to the benchmark objective over time.

401k-AllocationModel-011516-1

401k Choice Matching List

The list below shows sample 401k plan funds for each major category. In reality, the majority of funds all track their indices fairly closely. Therefore, if you don't see your exact fund listed, look for a fund that is similar in nature.

401k-Selection-List

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