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The Road To 401(k) Success

By Doug Fabian
President, Fabian Investment Resources
Host, The Doug Fabian Show

Beginning July 3, 2001, the big-time financial pubs will begin serving up their quarterly reviews. The Los Angeles Times, Chicago Sun-Times, USA Today, Barron's and the Wall Street Journal will highlight the shocking surprises and the damaging disappointments of the previous quarter, Q2.

So why should you care? Why look back on a questionable 90 days where disciplined mavericks broke even at best? Why evaluate the past if you may discover that you've lost more money since Q1? Isn't that crying over spilled carrot juice?

In essence, you can't create millions in stock market wealth unless you're committed to developing your future portfolio; you can't sit on your duff with visions of a buy-n-hold bonanza.

The rules have changed. You won't get 20% per year by holding the S&P 500 in your 401k; but you certainly might get 20% by capitalizing on positives in the marketplace, like small- and mid-cap value funds.

Remember, the maverick objective when reviewing past performance is to uncover ETFs and stock funds that have the ability to reach 20% annual growth. Bond funds and fixed-income products don't have that ability. And if you do not have access to an investment at your brokerage firm or within your 401k plan, simply leave it off that "wish list."

What funds and ETFs belong on your potential BUY list for an upcoming season of growth? Those that scored 5% in Q2, 10% YTD or 20% compounded growth since July 1, 2000 and/or July  1, 1996... the 5-year return. 

Short-term momentum is often indicative of solid advances in a new bull market. That's why 5% over the last 3 months and 10% YTD, particularly during troubled times, would be very impressive near-term strength. If the market does go higher, look for leadership from 401k favorites like Fidelity Low-Priced Stock (FLPSX) and Oakmark Select (OAKLX). These are value funds with great numbers in the near- and long-term!

Speaking of long-term, 1-, 3- and 5-year returns are also important when identifying those funds that have the potential to achieve the maverick growth goal of 20%. Because of the recent bear, not too many funds are putting up 5-year returns of 20%, but don't let this discourage you. 

Mavericks who avoided the bear did see 20% annualized growth from funds with 5-year returns of 15% or higher. 

Long-term Fabian favorites that may be in your 401k? During your Q2 review this July, take a look at Fidelity Dividend Growth, Janus Equity Income and American Century Small Cap Value.

Doug Fabian is president of Fabian Premium Investment Resource and editor of the company's four subscription-based newsletter products. For more information on these services and the highly rated Fabian Plan, including how it can help you attain your goals of growth and income using today's best no-load mutual funds, visit the Fabian web site at http://www.fabian.com/.