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posted on 16 October 2017

The Real 401K Plan Manager 16 October 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

Bull’s Still Runnin’

As noted last week, bullish trends remain in place, so portfolio allocations remain at target levels for now.

The markets are now extremely extended on several fronts. As noted in the chart above, it would require a near 12% decline just to intersect with the support and the long-term bullish trend. Extreme deviations from long-term trends don’t last forever, so caution is advised with overly aggressive exposure. We suggest taking the recent advance as an opportunity to rebalance risk in portfolios by trimming overweight equity exposure and adding to fixed income exposure is a prudent goal this week.

Specifically, reduce small and mid-capitalization exposure back to TARGET percentages. Use the cash raised from rebalancing to increase bond exposure back to target weights as well.

All NEW contributions to plans should currently be adjusted to cash or cash equivalents like a stable value fund, short-duration bond fund or retirement reserves. Stop loss levels should be moved up accordingly.

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. principle. 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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