7 replies to this topic

[Mnemonic]

Hey guys,

I started my 401K with my company at the beginning of this year and so far i have about $8K in it (Whoo!).

Only thing is, i track its performance on a daily basis, and it is constantly dropping to negative 22 percent and lower. This mutual fund is i guess the "default" one they choose when you start one.

I've been told i can choose to move it to other things like large businesses etc and that seems to be what alot of people have done here.

I know alot of you wont want to give financial advice, but what im really looking for is past experiences to make my decision.

[honesty848]

To get the best advice possible, you should list more details about yourself such as age, your financial knowledge level and how risk averse you are.

Since fund choices differ across 401ks, the best thing you can do is read the prospectus and expense ratios of all of your options. The younger you are, the more you should target growth funds. As you age, you can move toward blended and then income funds. Does your plan offer life cycle funds? They are certainly not the best from a return perspective, but if you limited financial knowledge, and little desire to learn, they are a good option.

I am in my mid 20s and have had success with a mix of high growth funds split between large, mid, and small caps. I allocate more toward the small and mid cap companies since I believe that that is where future economic growth will come from.

[Kevin20]

Hey guys,

I started my 401K with my company at the beginning of this year and so far i have about $8K in it (Whoo!).

Only thing is, i track its performance on a daily basis, and it is constantly dropping to negative 22 percent and lower. This mutual fund is i guess the "default" one they choose when you start one.

I've been told i can choose to move it to other things like large businesses etc and that seems to be what alot of people have done here.

I know alot of you wont want to give financial advice, but what im really looking for is past experiences to make my decision.

Actually our individual past experiences in our own 401k's won't help you. There are several things to think about. First, your 401k and its menu of available mutual funds is different from what any of the rest of us have. You need to review your menu of choices, and it can help the conversation if you post them. A typical 401k would have maybe 12 to 20 different mutual funds to invest in, representing most of the various asset classes.

You really want to be invested in (and with each paycheck, contribute to) several different types of funds, in order to be diversified. It's been a bumpy year for the markets, some things have gone up and some things down. You maybe have the bad luck to be putting all your money into a single mutual fund that's been losing.

Your 401k will allow you some method to change how your paychecks are allocating money into funds; also you can re-allocate the existing balance among the available funds. All 401ks' let you do that, that's standard. You can probably do it online.

Being properly diversified won't guarantee you'd be gaining, but you'd likely at least be losing less money than you claim to be doing now.

[bullthistle]

You should read the fund facts before you invest and don't pick this years winners because they could be next year's losers. Go to Morningstar and see what they say about the funds you have to chose from and see how they ranked over the life of the fund. If you can find a fund that has small, mid and large cap stocks and also foreign, which more then likely will be down this year then you are getting everything you need. Don't worry about dividends until you've built up your portfolio and since you are basically just starting look at the funds once a week.

[Big Ed]

Can you post which funds are available?

[TroyP]

I administer the 401k plan at my company. My plan is somewhat different from yours, in that our default investment is a low yield (but low risk) money market fund. That said, like many employers, we have an independent financial adviser who can help our employees to select mutual funds that meet their risk tolerance and investment objectives.

I don't personally use the adviser the company provides, but I do have an outside adviser review my asset allocations twice a year.

[boomhower1820]

I don't think anyone's 401k has been to hot this year. Target date funds are a solid option for a set and forget option.


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[TroyP]

I don't think anyone's 401k has been to hot this year. Target date funds are a solid option for a set and forget option.


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Take a good look at the fees on a target date fund before you choose one. I know the target date funds in our plan have way higher fees than the traditional mutual funds.

A 1% difference in fees doesn't seem like much, but for someone contributing $5k per year to their 401k, assuming a 3% annual raise and a 50% employer match on contributions, you're looking at a difference of $50,000 after 20 years. That's not chump change.