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401K Retirement Investing Basics 📈 5 401K Investing Strategies (Part 1)

401K Retirement Investing Basics 📈 5 401K Investing Strategies (Part 1)

[401K Retirement Investing] Basics of 401k Investing. 5 Basic 401(K) Investing Strategies. In 2017 It has never been more important for us to learn how to invest than now.In order for us to retire in the future we have to learn to invest our money to the best of our ability through a combination of 401(K) and other investments. Here are a few things I do to analyze, understand, and choose my 401(K) investments.

1. Discover Your Fund Choices: (Step 1)

Find out what investment choices are offered in your current employer’s plan. The fund choices, and number of available choices to choose from are going to vary from company to company. If you do not know what is offered ask your human resource department where you can find this information, and what provider they use.

Examples of 401(K) plan providers include John Hancock, Vanguard, and Fidelity to name a few.

Typically your provider will have an account you can access online where you can manage your 401(K) investments, research rate of return, fund choices etc. Log in, or create an account online to begin to perform your analysis.

The analysis may take you a few hours depending on the volume of funds you want to look at so you might consider breaking up your research into one hour blocks so you do not get burnt out.

2. Select the Criteria of the Funds You Want to Analyze (Step 2)

My 401(K) plan has roughly 60 investment choices. Yours may have less, or it may have significantly more, it all depends. If you have more than 100 choices I would consider selecting criteria important to you so your analysis will not consume your life. Here are examples of criteria you may want to consider to cut down on the number of funds you are going to look at:

– Rate of return over last 5 years, and last 10 years. (Example: Look
at funds that have the highest 5 – 10 return on investment)
– Fee ratios
– Are you more of a risk taker, or more conservative?

As you go through this process make sure you are writing down the fund names and ticker symbols as you go. If you can extract the data to excel that may be your best bet to save the most time.

Example: Fund Name: Fidelity Contra Fund: Ticker Symbol FCNTX.

I would highly suggest using Microsoft Excel. If you do not have excel considering using a binder or notebook so you can keep your notes easily organized.

3. Learn About the Funds (Step 3)

It is always hard for me to believe that so many people do not know what they are investing in when it comes to their retirement account, but they know so much about sports, or their favorite reality T.V. show. Generally speaking….through your 401(K) provider’s website you should be able to read about the funds online. I personally look at the following things:

– Top Holdings (What stocks make up this mutual fund?)
– Are the individual stocks in this mutual fund companies I would want to own?
– What is this funds long term track record, how long has the fund be around? I usually like to invest in something that has been around close to ten years or more.
– What is the expense ratio?
– How Risky is the fund?

Take notes as you go so you do not have to redo the work later.

If a financial advisor regularly comes to your company to give market updates try to meet with him (or her) to learn more about your retirement plan funds. The advisor should know these funds very well, and should be able to help guide you in this area. This does not mean you should avoid doing the research. If you have done your research ahead of time you can get their opinion on what you are thinking of investing in.

4. Utilize Free Resources such as Yahoo Finance to Aid You in the Research Process (Step 4)

Yahoo Finance is one of the most simple investment websites you can use to do additional research on your provider’s funds. In my particular plan the thing it was missing was stock charts.

I wanted to visually see how the fund was performing, and so I went to Yahoo Finance to do my research. If you cannot see the chart performance on your mutual fund I would highly, highly recommend taking the time to do this step.

Generally speaking you want to see a slow and steady increase in fund price over a long period of time. I’m looking for stable long-term growth for last 10 years, or more.

5. Choose Investments or Reallocate Your Current Investments (Step 5)

Time to take action!


Investopedia 401(K) Basics:

How to select 401K Investments:

Good luck to you in building wealth and securing your financial future.

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