posted on 06 September 2016
The Real 401k Plan Manager - A Conservative Strategy For Long-Term Investors
NOTE: I have redesigned the 401k plan manager to accurately reflect the changes in the allocation model over time. I have overlaid the actual model changes on top of the indicators to reflect the timing of the changes relative to the signals.
Waiting For Godot
Sometimes it feels as if we are waiting for something that will never come - a reasonable entry point to increase our equity exposure. As I have been repeating over the last several weeks, sometimes it is better to "nothing" rather than to do "something" that turns out to be wrong.
This weekend, take some time to review portfolios and make a plan for what happens next. I have often equated portfolio management to tending a garden in the past. In order to have a successful and bountiful garden we must:
So, with this analogy in mind, here are the actions to continue taking to prepare portfolios for the next set of actions:
Step 1) Clean Up Your Portfolio
Step 2) Compare Your Portfolio Allocation To The Model Allocation.
Step 3) Have positions ready to execute accordingly given the proper market set up. In this case, we are looking for a pullback to reduce the extreme overbought condition of the market without violating any major levels of support.
IMPORTANT NOTE: Taking these actions has TWO specific benefits depending on what happens in the market next.
No one knows for sure where markets are headed in the next week, much less the next month, quarter, year, or five years. What we do know is that not managing risk in portfolios to hedge against something going wrong is far more detrimental to the achievement of long-term investment goals due to the inability to recover the "time" lost getting back to even.
If you need help after reading the alert; don't hesitate to contact me.
Current 401-k Allocation Model
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. (If you want to make it more complicated you can, however, statistics show that simply adding more funds does not increase performance to any great degree.)
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.
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