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.
Another Retest
Once again the markets testing and held support at the 200-dma. That is the good news.
The not so good news is the overall trend of the market continues to weaken which is pulling our short-term moving average down towards the long-term. A crossover of those two averages have historically not been a good indication or forward short-term returns.
As I wrote three weeks ago, the “reflexive rally” to reduce exposure finally got into the “neighborhood” of our initial target area that we laid out more than a month ago. We suggested raising cash at that point. However, for new readers, we continue to suggest the same course of action on any rally next week.
“With both confirmed “sell signals” in place, and becoming more negative, the risk to equity exposure currently remains to the downside. If conditions improve we will rebalance equity risk in portfolios back to full allocations but a LOT has to happen first.”
If you have already reduced equity exposure just sit tight this week and let’s see what happens.
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.
