Managed funds did extremely well in 2013. Most getting double digit returns, and many getting 30, 40, even 50 percent! And yet it’s hard to find anything that remotely looks double-digit better, forget 50 percent better. How long can this divergence continue? Maybe for a long time, but the further it separates, the shakier the foundation.
If you put money into a 401k, you need to understand how that money is invested. Even better, there are ways you can manage risk in the present and dangerous market frenzy.
I am specifically addressing 401ks here because it is a place where people tend to put money away and forget about it. If you have a personal investment account, you are likely already investing your own money. If you have someone investing in funds for you, I implore you to start getting involved with what they are doing with your money. If you aren’t investing at all, start.
If you have a 401k, here are three ways protect yourself from the next collapse:
- Open a “self-directed” account. A self-directed account allows you to invest your own money. If your 401k plan allows this, it is the best choice. Here, you can allocate to your own level of comfort, keeping some cash to buy things after the crash, buying some insurance with gold and sliver in solid funds like Central Fund of Canada (CEF), or Sprott Physical Silver Trust, (PSLV), and buying some stocks if you are willing to take some risk.
- Roll over into IRA or Roth IRA. If you are no longer employed with the company sponsoring your 401k, roll over your entire plan to a firm that will allow you to invest your own money. If you are still employed by the sponsor, most plans will not allow you to move anything. However, some plans may allow you to roll the employer contribution (after it is fully vested). It is worth checking to see if this is an option.
- Move holdings to a stable or cash fund. You won’t get 50 percent returns, but you don’t want to lose 50 either. See if your plan has some kind of cash or money market fund. While I have a self-directed account, my wife is stuck with this option. We moved everything into a cash fund for now and will roll it over if she changes jobs. You may elect to keep some in the market, but don’t keep all your eggs in one basket.
What is keeping you from managing your own retirement accounts?