| New participants to 401k plans must quickly learn | | | | should shift their funds to safer investment |
| about proper 401k allocation. The reason is that | | | | options like bonds and cash equivalents. |
| so much of the success of their retirement can | | | | Another aspect to consider is the need for |
| rest on how well their investment decisions are in | | | | diversification. This is important to help address |
| their 401k plan. Since participants can normally | | | | temporary drops in the market. This diversification |
| place their funds into a number of different | | | | should generally be spread out among the three |
| assets (mutual funds, stocks, bonds, equities, | | | | main classes: stocks, bonds, and cash. However, it |
| etc.), it is important to know how each one can | | | | should also look into the specific variations within |
| impact your plan and the benefits of | | | | each class. You should look at adjusting your |
| diversification. | | | | holdings into the stronger performing groups in |
| Although each 401k plan will have different | | | | each sector. For example, this may mean having |
| investment options depending on the specific plan. | | | | more holdings in small cap stocks as opposed to |
| Generally, you will find that most are with big | | | | large cap stocks at a certain point in time. Also, |
| investment companies like Fidelity where they | | | | you may move funds into an international fund to |
| give you a broad selection of different types of | | | | provide more support. Finally, you may find that |
| mutual funds like Growth, International, Diversified, | | | | your 401k investing options are too limited and |
| Emerging Markets, Small Cap stocks, Mid Cap | | | | need to support your account by making other |
| stocks, Index Funds, Short term investments, etc. | | | | investment options outside the plan to support. |
| The typical 401k plan offered 18 fund choices in | | | | One popular case among investors is to use an |
| 2008. | | | | IRA account to access foreign investment options |
| The conventional wisdom of investing decisions is | | | | that are not available with their 401k. This is |
| to put a greater emphasis on stock mutual funds | | | | designed to give them further diversification and |
| when you are younger and shift more of an | | | | can sometimes be used as an area of growth. |
| emphasis over to bond funds and money market | | | | As a new 401k plan participant, you will do well to |
| funds as you get older. The reasoning behind this | | | | learn about all the different 401k allocation |
| is that when you are younger you can take more | | | | investment options. Although investment |
| risks and should naturally go for funds that offer | | | | strategies will vary depending on which financial |
| higher returns. However, as you get older, you | | | | advisor you talk too, the decision on where to put |
| should be more concerned about protecting your | | | | your money will ultimately rest with you. Be sure |
| 401k funds and keeping them in mutual funds and | | | | you are getting sound advice that supports your |
| investments that are more likely to offer smaller | | | | understanding of your options. These decisions are |
| returns but are safer. Still, you also must | | | | too important to not take the time to learn how |
| recognize the market fluctuations that can occur | | | | to invest your money wisely. |
| during recessions like now where all investors | | | | |