How do I choose the best picks for my 401k?

Question

I just got into the 401k at work and I need to choose some companies and I am completely lost. How would I go about doing it? Any help is appreciated

Answer 1

Learn about "Asset Allocation" & you'll do fine.

Check out;

401K's For Dummy's

BTW: Asset Allocation can be more important than picking the "right" funds.

Answer 2

You don't you dollar cost average.

You pick about 4 funds that you think are good.

1 Fixed Income fund (guaranteed return)

2. Large Company Stock Fund

3. Mid Size Company stock fund

4. Bond Fund (Bear Market)

Money is deposited regularly into these funds. When a fund is down, you get more shares for less money, when it is up, you get less shares for more money. So it balances out. If you find a fund that is really good, it might have peaked and be ready to crash.

Eventually, one goes way up, usually large company stock. Then transfer your gains to your fixed income fund to lock them in.

If the stock fund goes way down, transfer money from your bond fund or fixed income to take advantage of the low prices.

But never transfer if there is a fee for it. Usually you have 8 free transfers per year, and never transfer all of a fund.

Eventually, you will get the hang of it.

Answer 3

A work 401K is generally locked into one plan, like Fidelity or CitiStreet so you must choose from what that plan offers. Some plans offer much more than others. Fidelity, for example, has very few choices. Much depends on your age (how long before you retire?) and risk tolerance (how willing are you to put your money at risk?). Life-style funds take some of the work out of it, if your Mutual Fund company offers them. Do your homework - it's your money & your future that you are dealing with!

Answer 4

go with good, growth mutual funds.  Pick those that have been around a while and check their Morningstar rating - they should have 4 -5  stars.  And diversify - pick some small cap, medium cap, international funds, etc.

Answer 5

if you are young, choose equity funds. Every fund has a track record, look for the funds that have outperformed the market for at least a few years. I like value funds and small cap funds, but pick a few funds and invest a portion of your money in each. remember, these are long-term investments, so make decisioins that will work best in the long term.

Answer 6

I agree with Common Sense on this one but wanted to comment on the other answers.

It really just depends on what your risk tolerance is. We can't tell you which funds to pick without knowing more about you. But we can tell you to diversify.

Also, the company you work for is who choses the investment line-up for your plan. Not the investment firm administering it. But it's true that you have to chose from the list only. Try calling your 401k provider. Ask them about single allocation funds or "target" retirement funds (usually with a year attached to them). These funds are for people who don't really have the time to research everything.

If you do have time to research, they probably have a worksheet you can fill out to help you decide how much to allocate into which type of funds.