401k Investing for Newbies and Nerds
There are 90 million American workers who have collectively own $14 trillion in their 401k accounts. They face both challenges and opportunities. The largest opportunity is that their accounts are investment accounts, not savings accounts, and for the past three decades, many have grown their balances in the low double-digit range.
The main challenge 401k owners face is that there are required to make their investment decisions by choosing from a limited menu of mutual funds.
The 90 million 401k account owners can be divided into 3 categories. The first are those who could care less about their money and are willing to just take what they are given. The second group, NEWBIES, are inexperienced in the investment process, but are willing to become engaged in the management of their hard-earned dollars. The third group, NERDS, are those who have a modicum of investment expertise and are willing to devote the time and energy to expand their investments skills.
My mission is to motivate 401k participants to become engaged in their account and then train them how to optimize their results.
I have a 62-years of stock market experience. I have been a stockbroker, finance professor and individual investor. I have no investment products to sell. All I have to offer are the objective observations of one who has been there and done that.
401k Investing for Newbies and Nerds
The Big Beautiful Bill and Your 401(k)
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The stock market loves good news and hates bad news. The problem is that it has trouble deciding which is which. It also reserves the right to pause and change its mind midstream, without prior notice to the investing public.
Last week, the US Congress passed what the media refers to as “The Big, Beautiful, Bill. It covers a sweeping number of topics that will impact the trajectory of our society and economy for years to come. Many of the issues addressed in the Big, Beautiful, Bill are social in nature and of minor concern to the market. But there are two areas covered in the bill that have significant implications for the market’s future: Energy and interest rates.
The response of the 90 million Americans with 401(k) plans to this hazy forecast could be one of confusion and despair. But history tells us that the American economy has faced many uncertain times. And each and every time has emerge bigger and stronger. If the stock markets initial response to the Big Bill is negative, those 401(k) participants who are index funds investors will be able to buy additional shares at a reduced price and lower their average cost. If the markets response is positive, the total value of 401(k) index fund portfolios will increase in value.