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.
Bulls Stalled For Now
The market didn’t make any progress last week as overhead resistance remained problematic. With the short-term buy signal in place we are giving the “bulls” a bit of room to run this next week. As I stated previously, the market is holding support and the longer-term sell signal remains intact. If, or when, that long-term signal reverses we will increase the allocation model back to target allocation levels.
However, for now, remain cautious and 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.
