For an individual, the 401(k) is the greatest investment deal
around. Though only if it's properly managed. Here are some
basics to remember when Investing in your 401(k) plan.
1) Be wary of 'over investing' in safe funds. GICs and bond
funds should be kept to a minimum. Even though they are safer
then many other investments, they probably won't provide enough
of a return by the time retirement comes around. In the long run
you stand a better chance of growing your money by investing in
equity mutual funds.
2) Give as much as possible to the 401(k). Your 401(k) is most
likely the best investing deal you will find, so you should
maximize on this opportunity. The 401(k) plan has a maximum
annual investment, and you should be contributing that amount
every year.
3) Roll over your 401(k) funds directly. When you retire or
switch jobs, you should not take possession of 401(k) funds,
even if you are planning to invest them elsewhere. If you take
possession of your funds, this you may find yourself facing big
penalties and taxes.
4) The 401(k) plan is different then a home equity line or
savings account. The 401(k) is a retirement plan. The money is
for retirement! By drawing early you will receive penalties and
taxes. Also, dipping into your 401(k) will lessen the effects of
time and compounding interest on these investments. Just don't
do it.
About the author:
Richard Kirby Rich has been in the investing world for 9 years,
and has used multiple online investing strategies for over 4
years.
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