401k Investing for Newbies and Nerds
There are one hundred and thirty million American workers who collectively own $35 trillion in their 401k and related retirement accounts. The owners of these accounts face both challenges and opportunities. The largest opportunity is that their accounts are investment accounts, not savings accounts, and for the past three decades they have grown in the low double-digit range.
The main challenge 401k owners face is that there are required to make their own investment decisions by choosing from a limited menu of mutual funds.
These 130 million self-directed retirement account owners can be divided into 3 distinct categories. The first are those who could care less about their money and are willing to just let nature take its course. 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.
The mission of my podcast is to motivate and educate 401k NEWBIES and NERDS on how to optimize their 401k experience. I have a 62-year relationship with the stock market. I have been a stockbroker, finance professor and individual investor. Ten years ago, I appointed myself to the position of 401k guru extraordinaire. 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.