Most people begin managing their own 401(k); in essence they are their own advisor, rarely deviating from the pre-selected group of investments chosen at the time of initial setup. Hopefully, their company provided some matching amount while they became complacent as their balance was slowly increasing. In some cases, friends may have convinced them they selected better choices, or, they may have read the funds return statistics to help determine potential changes within the limits placed on most 401k fund movements. Therefore, they weren’t paying for any advice, and there obviously wasn’t a direct bill from an advisor, because any alterations occurred only at their fingertips. Often, they just accumulated the status sheets received in the mail and reviewed them only during tax preparation time annually.
Does this sound familiar? Fast forward a few years, and, barring any market or investment downturns, the 401(k) value could potentially be much larger, if only from continued contributions. However, the investments are still following the same pattern used when it was started, when there wasn’t a sizeable value to lose.
World events can affect the market in a moment’s notice, impacting investment vehicles in a variety of ways. Our busy lives don’t often allow us to devote the time necessary to make changes essential to protect our investments in the timeframe this volatility requires. Even the most attentive investor might not have the ability to make the required changes, due to the limitations that many 401k plans place on transfers between investments. Passage of time affords the opportunity to plan for retirement, while, at the same time, recognizing the decline of our earning years potential for more accumulation of wealth.
In hindsight, could someone have watched this package over the years and guided it to a better outcome? Maybe. More importantly, should someone watch it to ensure what has been garnered is not lost and to help guide it to future success? If you’ve already entrusted your rainbow’s end pot of gold to an investment salesperson rather than an investment advisor, this choice may have you even less prepared to quickly respond to market changes.
Keep in mind that your 401(k) is eventually going to be relied upon to provide income, so its health must be continuously managed. So where do you stand in determining who will be your advisor for the life of your 401(k)? When used in conjunction with your investments, we don’t believe anyone should be told “everyone took a beating”. Instead, invest with a company who will look out for you….because your portfolio deserves better.
George Gerner is the director of Marketing and Investor Relations at TRG.