posted on 20 December 2016
The Real 401k Plan Manager - A Conservative Strategy For Long-Term Investors
Riding With Santa
With the last two holiday-shortened trading weeks just ahead, portfolio and hedge fund managers will likely continue to chase performance and “window dress" portfolios into the end of the year.
However, come the first quarter of the year, the risk of a correction to some degree is highly likely to reverse the extreme overbought condition of the market. Therefore, as I penned in last week’s missive, I continue to suggest using the current rally to clean up portfolios as detailed in previously.
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 correction to reduce the overbought condition of the market to allow for a better opportunity to rebalance equity risk.
The big risk in the near-term is when the markets come to grips with the rise in rates, simultaneously with a stronger dollar, which will quickly erode earnings in an already over-valued market. With the Fed rate hike last week, the further tightening of monetary policy, against an already weak economic backdrop, suggests an elevated risk of correction.
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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