We have finally come to accept that a Sex and the City 3 is just not meant to be. Although we can’t get SJP and Kim back together again, we can most certainly pull a Carrie Bradshaw-inspired favorite from our archives. Plus, we’ve added a sweetener to the end…
If you’re like most Americans, the bulk of your retirement savings is nestled in a company retirement plan like a 401(k), 403(b) or 457. Since we tend to ignore obstacles that may lay ahead when things are going well, it’s time again for a reminder to carefully consider your retirement plan investments.
Choosing investments in your 401(k) or other company plan is a lot like online dating. You are provided with a list of names to choose from, a bit about their heritage (stocks or bonds, domestic or international) and some information about their past (performance). Just like with dating, you don’t want to rely on an online profile to make this important decision. Ask these “get to know you” questions about your investment options before making your selections:
Will I Feel Safe? A risky lifestyle may be a relationship deal breaker. Risk should also be considered when selecting investments. Do not rely just on performance figures provided online. The fund with the highest return may also be the one with more ups and downs than you can stomach. More importantly, do not marry a fund just because it has performed well for you. Your allocation to riskier investments – as strong as they may have performed in the past – may need to be reduced as you near the distribution phase in retirement. Work with your financial advisor to review volatility and risk measures such as beta, standard deviation and Sharpe ratio to see if you will feel safe – and can afford to stay – in the relationship.
What’s On The Inside? Mutual fund names tell you very little about how they are actually invested. Review the fund’s prospectus to learn more about its make-up or ask your financial advisor to take a look for you. If you aren’t familiar with the “insides,” you could be missing out on opportunities or doubling up on similar funds, providing little diversification.
Will It Get Along With Others? Chemistry is important in a partner, but he or she also needs to fare well with other people in your life. The same goes for your investments. If you and your spouse both have retirement plans or investments outside of your company plans, it’s important to make sure they all work well together. Perhaps your spouse’s plan offers the best small-cap stock fund and yours has a great large-cap stock fund. Rather than buying sub-par investments in both plans, allocate across plans to get access to only the best fund options.
Should I Keep My Options Open? Although the goal for dating is to find “the one,” the goal for investments is to diversify risk through multiple partners. How many investments you choose, and what type, all depends on your target asset allocation. Where you choose to hold the investments will depend on account types and fund options available.
Flying Cars Are on Their Way
10 Tips to Being a Happily Self-Employed Person
5 Techniques to Increase Your Work Productivity
Making Sure Your Clients’ Keep Their Medical Directives up to Date
Social Isn’t Another Chocolate With a Different Wrapper
A Passport To International Value
The Emotional Biases That Cause Investors to Stumble
Recent Corporate Bond Market Weakness
Top Funds’ Activity in Q3 2018
Why Should I Do Business With You?
Equities9 hours ago
Top Funds’ Activity in Q3 2018
Insights10 hours ago
You’re (Possibly) Richer Than You Think
Public Relations10 hours ago
Be Sweet to the Algorithm: Producing Content that Makes Google Happy
Learn1 day ago
A Surprising Post-Election Investment Idea
Development1 day ago
The Extraordinary Power of the First 90 Days
Digital Strategy1 day ago
FINRA and Compliance In The Era of Fake News
Building Smarter Portfolios2 days ago
Beware the “Known-Unknowns”
Learn2 days ago
Cybersecurity Without The Commitment