In this video, we'll explore the dangers of frequently checking your 401k and how it often leads to making impulsive decisions that may not be in your best interest. We'll also look at why market timing is not a good retirement investing strategy, and what you can do to ensure that your retirement investments are secure. So join us as we take a deep dive into how to properly manage your 401k and make the most of your retirement investments.

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There is one huge mistake that I have seen 401k investors make and it has the possibility to impact not only the performance of your 401k it can add a tremendous amount of stress to your retirement planning efforts. If you’re new to our channel, I am Johnathan Rankin, the Founder of Theorem Wealth Management a retirement planning focused firm to help you maximize your retirement. In this video I’m going to talk about a huge mistake I have seen 401k investors make and make sure you stay to the end where I share 5 retirement investing tips you don’t want to miss.

As soon as you setup your 401k, one of the first things you’ll do is choose how the money you save will be invested. How large your 401k can get will be based on 3 main factors, how much you save, how many years you save for and what your savings is investing in.

When people start out investing, they often think of scenes from movies like wall st where you have traders on the floor buying and selling. And the its easy to think, that is what I need to do to be a successful investor. Or now days its multiple screens with charts all over the place. The reality is that is not what is needed to be a successful investor. In fact, being that active, just might prevent you from reaching your retirement potential. There is one common mistake I see a lot of investors make when investing for retirement and it comes down to how often they are checking and updating retirement account investments.

As you save and invest for retirement, it's important to make sure that your investments are on track to meet your goals. But how often should you be checking and updating your retirement accounts?

The short answer is, it depends. In theory the frequency with which you check and update your investments should depend on your personal investment strategy, your risk tolerance, and your overall financial goals. But this is leaving out one of the biggest factors of retirement investing, your investing behavior.

The closer you get to retirement and the larger your portfolio gets, the less tolerant of risk most people become and in highly volatile markets like we have seen over the past year, it is easy to become worried about your investment strategy. When you combined volatility with fear of losing money, bad things tend to happen.

In down markets there are typically 3 camps of retirement investors, the ones who check it everyday, the ones who don’t check it at all and the ones who don’t change their process. And depending on your investing behavior, there really is no wrong camp to be in. Of course not checking your account at all makes it difficult to know if youre on track to your long term goals, but if you’re working with an advisor who is monitoring it for you, then that might just make the path to retirement a lot less stressful.

On the otherhand if you are a disciplined investor with a long-term view, then there is no problem with checking your account daily.

When that becomes a bad thing is when it’s not just checking the balance daily, but it becomes trying to make a bunch of changes. In down markets especially, there is a common thought to just move things to a safe place and wait until things get better. The issue is that by that definition, a better market would be a higher market and I have never seen financial success defined as selling low and buying higher.

One of the biggest dangers of market timing is the potential to miss out on potential gains. According to a study by Morningstar, investors who attempted to time the market by moving in and out of stocks missed out on an average of 3.5% in returns per year compared to those who remained invested. This is because by attempting to time the market, investors may miss out on the potential for investments to recover and provide long-term growth. In fact, according to JPM, the average investor underperformed almost every asset class from 2002-2021. They attribute this to the average investor constantly rotating out of underperformers before they recover and into strong performers before they decline.

Market timing can also lead to emotional decision-making, which can be detrimental to long-term investment success. Research from the Journal of Financial Planning found that investors who engage in market timing are more likely to make hasty decisions based on short-term market fluctuations, rather than sticking to a long-term investment plan.

When it comes to predicting where the market will be, even the biggest firms on Wall street can’t do it. In fact, at the beginning of 2022, the year-end predictions for the S&P 500 were 5300 by BMO, Wells Fargo with 5200 and goldman sachs with 5100, the market closed the year at 3854. In fact since 1992, only 2% of active funds out performed the S&P 500

There is a very big difference between market timing and regular changes to your investment portfolio. If you are going in on a regular basis and rebalancing your portfolio or you are making adjustments to your portfolio based on a change to your long term out look to the market, that’s completely normal. Where it becomes troublesome is when you take your whole portfolio and shift it into one investment because the market had a down day or you have a gut feeling on how the market will react to certain news. Build a routine around your retirement investing. How will you set up your investment portfolio, how often will you review it and make changes and stick to that in good markets and bad.

Investing during volatile markets can be stressful, that is why it is important to create a strategy that fits not only your long-term goals and risk tolerance, but also your investing behavior. Which leads me to 5 retirement investing tips to remember.

1. More risk does not mean more reward

2. If your investment portfolio is based on how you think the market will perform this year, you are setting yourself up for failure

3. Long-term investment success is not flashy, its boring

4. Diversification is more than the number of funds you invest in, its about what those funds actually invest in

5. Every bear market in history has ended and eventually turned into a bull market. It is important to remember that in bear markets.  

If you wonder if you are on track to your retirement make sure you check out this video where I discuss how much you actually need to retire. I’ll see you there

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