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posted on 22 May 2017

The Real 401k Plan Manager 21 May 2017

Written by , Clarity Financial

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


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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

Markets Take A Hit

Last week, I raised the issue of a “breakout" reversing the weakness in the market from March. However, as was my concern, the “breakout" was very short-lived and the markets took a hit on Wednesday following concerns of an “obstruction of justice" potentially stalling legislative active indefinitely. Fortunately, it turned out to be just another #FakeNews story from the very people who state they are not #FakeNews.

However, the recovery on Thursday and Friday was not enough to reverse the short-term “sell signal alert" as of yet which keeps the allocation model on hold this week.

For now, maintain cash levels, rebalance portfolio allocations and let’s see what happens next week.

We continue to watch developments closely and feel we have enough equity risk at the moment giving the current backdrop. If things improve next week, we will upgrade the allocation model with an expectation of a 90-day holding period outlook. (This is due to stay in alignment with 401k trading restrictions. If we cannot get comfortable with a 90-day outlook, we will remain on hold.)

Refrain from adding further fixed income holdings, for now, take some profits from overweight holdings, but maintain exposures.

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.

401k-Selection-List

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