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posted on 19 October 2016

The 401k Plan Manager 17 October 2016

by Lance Roberts, Clarity Financial

The Real 401k Plan Manager - A Conservative Strategy For Long-Term Investors


401k-planmanager-101516

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.

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. I never advocate being 100% out of the market as it is far too difficult to reverse course when the market changes from a negative to a positive trend. Emotions keep us from taking the correct action.

401k-PlanManager-AllocationShift

Something Just Broke

The good news is we appear to no longer be “stuck" as discussed last week.

The bad news is a more important correction may have just started. We won’t now until we get a bounce next week to see where it fails. A failure to break the downtrend line from recent highs, followed by a break below support at 2132 currently, will lead to a further decline.

We continue to remain cautionary in 401k allocations which have kept volatility low and principal safe. We will once again remain at current levels this week until we see what happens next.

One important note in the 401k chart above. We are dangerously close to triggering a second sell signal, the bottom part of the chart, which will likely coincide with a failed rally attempt over the next week or two. Such an outcome would suggest a weaker market environment in the intermediate term with a high degree of caution required.

Again, with early warning signals are suggesting the correction has more room to go, so let’s be patient once again this coming week.

With the election right around the corner, increased volatility is expected. Therefore, having a little extra cash in portfolios will likely be a good hedge for now. Sit tight for now and I will update you on Tuesday.

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-ModelTarget-071616

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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