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.
Second Half Starts Positive
While the market improved last week, and held support once again, it was a holiday-shortened week so we are going to wait and see what happens Monday to see if we get some follow-through confirmation. With a “tariffs” now “live” we are cautious as to earnings season to see if tariffs are beginning to impact corporate profitability.
The market is holding support, but only marginally so, and longer-term sell signals remain intact. If, or when, those signals reverse we will increase the allocation model back to target allocation levels.
Remain cautious for now continue to follow the rules below:
- If you are overweight equities – use any rally to reduce international and emerging market exposure.
- If you are underweight equities – look to rebalance to target allocations, as shown below, next week.
- If you are at target equity allocations currently, do nothing for now.
We will review again next week.
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.
