posted on 14 March 2017
The Real 401k Plan Manager - A Conservative Strategy For Long-Term Investors
All Eyes On The Fed
I wrote almost a month ago, that in retrospect I should have increased the 401k model allocation to 100% at the beginning of the year, the risk/reward setup for an incremental increase in exposure simply has not been justifiable given the limitations that exist in 401k plans.
The current correction, if it continues, may give me the opportunity to get the model realigned with the underlying signals. Such an increase will require a correction back to moving average support around 2250-2300.
As noted in the chart above, the current extension above the moving average must be corrected to justify an increase in equity risk currently.
However, the run up in interest rates last week HAS put bonds into a favorable position to add exposure in portfolios. If you are underweight the current targeted allocation weight in bonds, exposure an be increased to target levels.
As stated, if we can get a correction that resolves the overbought, extended and excessively bullish backdrop to the markets currently, I WILL increase the allocation model to 100%. For now, we will wait and let the markets tell us what it wants to do next.
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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