Safe and Smart

Managing your 401(k) investment requires that you avoid disasters (safe) and achieve inflation-beating, long-term returns (smart). If you can do these two things, the power of compounding over time will work its miracle and generate a constantly growing, accelerating pool of capital from which to draw sufficient income in the future to provide for you and yours in retirement.

As you have seen, a large, constant exposure to the stock market opens up the possibility of substantial declines which can set you back for years. Also, you know that hiding in safe havens, such as stable value funds and bond funds, will not provide you with the investment power to overcome the effects of inflation on your purchasing power.

The traditional solution is to invest in some of both, in proportions which fit your ability to tolerate risk and volatility. The "normal" result is a portfolio split between stocks and bonds, with stocks predominant, usually at 60% of the portfolio.

The problem with this "solution" is that both the stock portion and the bond portion, if held continuously, are open to substantial losses under certain conditions. For example, from 1968 to 1982, both stocks and bonds suffered from high and rising inflation. Portfolios holding both asset classes suffered long-term losses, or, at best, no gains adjusted for inflation.

Our solution is different.

As you will see in the description of The 401(k) Formula^TM, the returns of the stock market are not distributed randomly over time. There are clearly identifiable time periods, which recur cyclically and regularly, when the odds of investment success in the stock market are much higher than normal. By confining your exposure to the stock market to these "power periods", you substantially reduce the risk of a disastrous loss. Ours is a disciplined approach, which repeats the same formula over and over again through time - always confining our exposure to stock market risk to those well-defined time periods when the odds of success are high. When not in stocks, we bide our time in the relative safety of conservative bond funds.

This is our solution to "safe" and "smart".