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[00:00:00] hello today, I’m going to talk with you about your 401k and the number one mistake that I see people make regarding the investments within their 401k. So typically what happens is you get set up with your new 401k. You go in there and there’s a handful of options to choose from every now and then you’ll have a whole bunch, but most of the time it’s gonna be like a dozen and then there’ll be things called target date, retirement funds.

[00:00:22] And basically the biggest mistake that happens is you’ll look at the historical returns and you’ll look more specifically, probably in the last year or year to date. And you’re going to choose the one that is doing the best. So all of these things have different ways of working. They’re targeting different parts of the investment world.

[00:00:42] And so that’s one of the reasons why it’s a mistake because you might be putting all your chips on one thing and not being really as diversified as you think you are. You might be diversified within larger companies or diversify within international stocks. But if you’re choosing just one fund, sometimes that’s not going to be as diversified as you should be.

[00:01:00] And if you’re just choosing the one that ranks the best. That’s usually asking for trouble and it sounds counterintuitive. You’re like, “Oh, I want to pick the best one”. Well, the best in short term timeframes is super relative. And I’m going to share with you a quick resource, and this is something that you can access online.

[00:01:16] It’s nothing special that only I have access to.  If you go to callan.com, C A L L A N .com, you’ll be able to find something that’s pretty interesting looking. It’s called the Callan periodic table of investment returns. And so, because there are those different. Investment styles that you can take.

[00:01:34] There are the US large companies, small companies in the US there’s. International companies. There’s going to be emerging markets that are kind of smaller sized countries that are up and coming and there are bonds and fixed interest rates and cash. they also have real estate too. So that’s the main ones that this periodic table is going to capture.

[00:01:56] That’s usually what captures probably 90% of what you’ll see. In someone’s portfolio. So if you look at it, what happens is they order them from the best performance at the top to the worst, performing on the bottom. And so if you go and you look at what did the best back in 2019 or the best in 2018, basically what you’ll see is.

[00:02:19] Over the last 20 years or so there hasn’t been a repeat top performer that does best two years in a row, but that’s your expectation, right? If you want to choose the thing that did best last year, it’s because you think it’s going to do the best this year. So not only are you not diversified, but you’re also probably going to be on the wrong side of your expectations there.

[00:02:39] And then this also is just a clear indication of why it’s best to diversify because. Although, some things will not do great in your portfolio. You’ll get the, to average and the averages of these things tend to work really well over long-term time horizons for you and your, your long-term plan. So hopefully this is a, a quick reason I’m not to just choose what did the best last year, because that’s, that’s usually a huge area.

[00:03:02] You’ll be sorely disappointed almost every single year, I suppose, every now and then you could get lucky and things might change. Course. It might be a two-year repeater, but the chances of it doing three years in a row, also very unlikely. So make sure you’re diversified and just hopefully have additional knowledge on how to approach that.


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Lucas Casarez is a Certified Financial Planner™ Professional serving tech professionals virtually out of Fort Collins, CO