Time Your Contributions
This final suggestion will be a little controversial, but hear me out. To the extent your plan will allow, try to increase your contributions in the fall and winter in order to take advantage of the better returns historically enjoyed from the October to April time period. As I mentioned in the introduction, average monthly returns for the May to October months is just 0.23% compared to 1.16% for the November to April months.
Let me be clear here: I am not suggesting that 401k investors employ an aggressive market-timing strategy with their retirement nest egg. History has proven that most investors are terrible market timers. And part of the 401k plan’s appeal is the ability to systematically save for retirement using regular contributions from your paycheck.
But, if you are to play the odds, you are more likely to enjoy better returns in the November to April period, so making any large contributions early enough to get in front of that period makes all the sense in the world.
Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays.