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Top Tips for 401(k) Diversification

By , February 2nd, 2017 | No Comments


401K Diversification

Retirement is a tough topic to broach. For many of us, it’s difficult to make ends meet while we’re living from paycheck to paycheck. Retirement is a faraway concept that many Americans are neglecting, as they work longer hours and more years. However, a diversified investment portfolio is an absolute priority these days. We cannot afford to put all our proverbial eggs into one basket, in case we lose our entire investment. Building a valuable retirement package is no mean feat. Fortunately, many theories have emerged over the years detailing the correct mix of financial assets in a retirement account. Now that 2017 is upon us, it’s time to reassess the viability of various assets in 401(k) retirement plans. Not every asset is going to pay dividends under different economic conditions. For example, the Trump administration is expected to push an economic agenda that will favor the construction sector, with building supplies, steel, iron ore, copper, cement, and similar industries.

Think Energy As Part of a Short to Medium-Term Investment Strategy

The energy sector is yet another facet of the economy that is going to come into focus this year. Exchange traded funds, company stocks, and physical commodities present many profitable opportunities. For example, the November 30, 2016 meeting of OPEC producers where they agreed to cut production by 1.2 million barrels per day will significantly affect oil prices. This means that companies like BP, Exxon Mobil, Chevron, and others will come into their own in 2017 and beyond. Presently, the price of WTI crude oil is around $53 per barrel, and analysts at leading merchant banks and investment enterprises are anticipating the oil price to spike as high as $60 – $70 by the end of the year. This makes a strong case for a portfolio mix comprising energy stocks like Exxon Mobil, BP, and Chevron Corporation. At last count, the price of Chevron Corporation stock on the New York Stock Exchange was up 1.21% or $1.36 at $113.57 per share. In a similar fashion, Exxon Mobil Corporation is up 0.11% or $0.09 at $83.54 per share, and British Petroleum stock is up 0.36% or $0.13 at $35.92 per share.

Change the Way You Invest to Include Strong Gains in Short-Term Spells

True to form, 401(k) investment plans are long-term opportunities. However, the global economic landscape is quickly changing and what used to work in the days of old is no longer effective for retirement purposes. Take individual stocks as a case in point. It’s not enough to dump money into a stock once a month and hope that it depreciates enough by the years’ end, or at the end of a 5-year period before you reevaluate your investment in the stock. A better way to dabble in the financial markets for long-term gain is to actively participate with things like Stern Options. By taking a real interest in price movements, you can significantly increase your yield on your financial portfolio without leaving it to investment managers, fund managers or purported 401(k) experts. Diversification of your 401(k) investment plan is essential to the long-term viability of your retirement. With so little available at the end of every month, it’s difficult to put anything away that will be of use to you in 20 or 30 years’ time. Fortunately, contrarian investment advice has a part to play in your retirement nest egg.

A mix of actively traded stocks, commodities, indices and currency pairs as well as physical holdings of commodities like gold, silver and the like will go a long way towards bolstering a 401(k) plan for your retirement. It’s important to ensure that you’re not underweight or overweight on specific financial assets. Gold is likely to perform weekly in 2017 given that the Fed will probably initiate at least 1, 2 or 3 rate hikes this year. Gold does not perform well when the USD is appreciating since demand for the precious metal decreases. However, a risk-off approach to equities markets could soon become a reality. Markets have been growing way too fast, without the requisite foundations in the economy developing. Already the Dow is over 20,000, and a correction is bound to occur sooner or later. Investors need to be ready for these shocks and corrections (20% decline) when they happen. A balanced 401(k) plan can do that for you.

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