Written by Lance Roberts, 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.
No Change From Last Week
After a week of lot’s of “up and down,” the markets ended just about where they started. The lack of forward motion keeps models on hold this week as internal deterioration resumed. That turmoil kept the initial warning signal and “sell” signal intact which keeps portfolios a little more heavily weighted in cash.
As opposed to our portfolio model allocations, where we have more flexibility in movement, we look for opportunities to adjust risk exposure with a view of a 90-day holding period. (This is due to 401k trading restrictions. If we cannot get comfortable with a 90-day outlook, we will remain on hold.)
After weeks of refraining from adding further fixed income holdings, and taking profits, the pop in interest rates will provide an entry point potentially in the next week or so. Stay tuned.
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.
