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.
Consolidation Of The Breakout
I highly suggest you read the first article this week. It contains much information that is relevant to our 401k plan positioning.
Currently, our model remains underweight equities at the moment as we have to respect both of the “sell signals” that currently remain intact as shown above. We also try to remain cognizant of the “trading restrictions” that exist in most 401k-plans. Over the last couple of months, we have been recommending to reduce equity allocations as follows.
We have also, during that time, stated that:
“If you have already reduced equity exposure, just sit tight this week and let’s see what happens.”
Last week’s instructions remain:
- If you are new to reading the newsletter or have NOT taken any previous actions or are overweight equities in your plan – Do nothing.
- If you are slightly underweight equities in your plan – move to the RISK ADJUSTED allocation model.
- If you are very underweight equities in your plan – move 50% of the way toward the RISK ADJUSTED model.
While conditions have improved in the short-term, we are not out of the woods just yet. Remain aware of the risks and pay attention to your portfolios.
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.
