How to Manage Your 401k Investments Wisely

Last updated Mar 21, 2021 0

Administrators and employers don’t make it easy. Understanding what is available to you for your 401k investment is one thing; deciding how to manage and what to do with your investment is another. Learn how you can manage your 401k investment wisely as the market moves in different directions.

Ways to Manage Your 401k Investments Wisely

First, explore your 401k website and see what types of funds are available for you. Determine how much you want to contribute to your 401k investment. Remember, you want to contribute the maximum amount allowed based.

Do not simply match to your employer’s matching percentage because contributions greater are still tax deferred. Also, make sure that you do not withdraw from your 401k investment if you are younger than 60. It will result in a penalty with full taxation and will definitely not be a good investment. If times are tough, simply contribute a smaller amount every time.

Next, figure out what you want to invest in. Most 401k plans offer choices, including company stocks, bond funds, stock funds, money market funds, retirement funds, and balanced funds.

A good 401k plan investment is to invest in a variety. Diversity instead of buying all company stocks. If you are still young and want to maximum money growth, contribute to a variety of different stock funds. For example, you can contribute 25% to large cap, 30% mid cap, 25% small cap, and 20% international funds or something. If you want to invest on a safe side, split between bond and stock funds.

If you are scared and want the lowest risk possible, simply invest in balanced funds or dated retirement funds that match with your date of retirement. Remember, contributing to a 100% no risk can sometimes make you lose money if inflation is higher than the rate of return.

Finally, monitor your 401k plan investment on a regular basis. It is a good idea to increase your contributions as your salary increases, tune your funds and stocks based on performance, and move to safer funds if you sense any risks involved.