Wall Street Always Optimistic About Your Minnesota 401(k)

When you break it down, Wall Street is a simple business model.

Companies need money. From sales of their stock. Or bonds.

The stock has to be sold to someone or something. For a commission.

A bank. A lender. A sales force. Wall Street summarized.

The customers are hedge funds, mutual funds, and other institutional clients.

And you. Investing in your 401(k) mutual funds.

You come last. At the bottom rung of the most important elements.

All the players “get paid.” With the money you invest in 401(k) mutual funds.

Here’s another big part of the Wall Street 401(k) mutual fund game.

“Buy-and-Hold.”

Ever wonder where that phrase came from?

Or why it is so popular with 401(k) investors of all generations?

Wall Street is incentivized to keep you 100% invested.

Up, down, and sideways stock markets. Good or bad economy.

Nowhere more true than in your 401(k) mutual funds.

The more you invest, the more you stay invested.

The higher the mutual fund management fees.

Nothing wrong with that fact when the stock market rises.

What if all the great expectations for 2025 are wrong?

Easy to fix with a 401(k) “stop loss.”

A defined 401(k) mutual fund exit point. In dollars or a percentage.

If a stock market decline drops a 401(k) mutual fund value, you sell.

The same with a drop in value of your 401(k) account.

A 401(k) “stop loss” is insurance against a catastrophic event.

That wipes away the last few years of your 401(k) stock market gains.

Along with your personal and company-matching 401(k) contributions.

A 401(k) “stop loss” is an actionable event. A decision made in advance.

Part of a disciplined 401(k) investment management strategy.

“Making money” in your 401(k) has been great.

Not “losing money” in your 401(k) going forward is even better.

One more thing about a 401(k) “stop loss.”

It can “rebalance” your 401(k) account the right way.

Traditional rebalancing takes money from winners and adds it to losers.

Why sell any part of your best 401(k) mutual funds? Ever.

A 401(k) “stop loss” sells your mutual fund losers.

And raises your money market balance. To buy more 401(k) mutual fund winners.

It is important for the long-term health of your 401(k).

That you understand the game you play with your 401(k) mutual funds.

It’s especially important to understand as 2025 takes shape.

Ric Lager

Interested in a 401(k) “stop loss” strategy now?

If so, comment below.

P.S. A 401(k) “stop loss” strategy may sound scary at first.

Once you use it in your 401(k), you will always use it in your 401(k).