How To Maximize Your k Mutual Fund Returns

When it comes to k's there is an overabundance of sad stories. Here is one that at least has a happy endingand it's getting happier all the time. Last year (in ) a friend of minelets call him Jackphoned and asked if I could help him with his k. Jack works for a large company as Senior VP of lending and is financially pretty astute. However, when it came to his k mutual fund decisions, he had repeatedly made the same mistake most people were making. As a result, he saw his account drop in value substantially. At the time we were in the midst of the bear market, which showed no sign of letting up. Jack had purchased into a Lifestyle fund because someone recommended it. By the time he finally bailed out, it cost him dearly. However, he continued to make the same mistake by reinvesting. He checked with the k representative and subsequently switched to a variety of mutual funds ranging from World Stock to Domestic Hybrids, Large and Small Value as well as Growth. But nothing worked and his portfolio value headed further south. By the time we met to discuss his k Jack was pretty disgusted by the canned advice he had received and the continued losses he was sustaining. Jack knew that I had pretty much eluded the bear market of by having sold all of my clients positions on //. We were safely in our money market accounts weathering out the storm (see my article How we eluded the bear in at http://www.successful-investment.com/articles.htm). Thinking about this, Jack could only shake his head because at no point in the market slide had he ever been given what I believe was the right advice. That is, no one suggested that, since we were in a bear market, he might want to step aside and remain in the safety of his money market account. So he stayed invested, hoping against the evidence all around him to find something that was not crashing. That was his mistake, and one shared by many. The advice that he consistently and continually received was that the market was close to a bottom, stocks have to move up from these levels, and, my personal money losing favorite, the market cant go any lower. That's what people wanted to hear and believe. But my tracking system said otherwise, and I followed its indicatorsmuch to the delight of my clients. Jack wanted to know how I could help. Looking at his mutual fund choices I realized that they were actually pretty decent, and he had a variety of some funds. So, what was the problem and how could we solve it? In a way, the answer was simple. But people were having to get pretty beat up before they would see it. My first step was, with Jack's permission, to log on to his k web site. Then I started making some adjustments. Since my trend tracking model was still in a Sell mode, I liquidated all of his positions and moved the proceeds into money market. This accomplished one thing right away: He stopped losing money. When you stop moving backward, in relation to everyone else you are moving forward! Second, as my trend index moved into a Buy mode on April , , I researched his funds again. Based on strong momentum figures, I invested in two of his mutual fund choices. The result was very gratifying: the funds I chose moved up around % in the two months after my Buy. (Other funds I had tracked and selected for other types of investment programs moved up as much as % in that period.) Jacks been happy ever since. While the % appreciation is not as great as I was able to do with assets outside his k, it still confirms that the key to successful investing is methodology and discipline. Our disciplined approach relies on objective information. It disregards Wall Street hype designed to perpetuate commission-rich buy now while it's low, or buy and hold strategies. If you have been in a situation similar to Jack's, or you want to avoid being in one, find an investment advisor who bases his decisions on a measured and objective approach. That will give you the edge no matter whether the market is going up or down and will give you the greatest protection from sad stories with your k. © by Ulli G. Niemann