3 Best 401k Investment Strategy Tips

Choosing a sound 401k investment strategy is one of the most important parts of retirement planning. Maximizing returns from your 401k portfolio is critical because you will be living off of this money at some point in the future. Many investors leave their 401k returns up to chance and hope that they have enough money later. If you want to make sure that you have money upon retirement, you need to be proactive now and plan your investment strategy. Here are a few tips for planning your 401k investment strategy.

1. Asset Allocation

When you are trying to set up your 401k, you need to think about the asset allocation. Asset allocation is one of the most important factors in developing a solid portfolio. Asset allocation is a concept that deals with how you allocate your investment funds to different types of securities. For example, you might put part of your money into stocks and another part into bonds. When you do this, you lower the amount of overall risk for your portfolio. There are many general rules that are used for asset allocation. For example, one of them is popular rules of thumb is to take your age and subtract it from 100. The number that you are left with is the percent that you should put into stocks. If you lower the percentage in stocks as you get older, your portfolio will become safer and your retirement dollars will be there when you need them.

2. Consider Alternative Investments

When it comes to putting money into a 401k, many people only like to think about the main types of investment like stocks and bonds. While these are good investments, you should not limit your options. If you have the opportunity to invest in other types of securities, you might want to explore it. For example, putting a certain percentage of your portfolio into precious metals or commodities might make some sense. By doing this, you can get a hedge against inflation and invest in an asset that is uncorrelated to the stock market. If you have the option, you might also want to invest in real estate. Some 401ks will allow you to put money into REITs and some allow you to put money into direct real estate investments.

3. Growth Stock 

If you are trying to get a great deal of assets accumulated for retirement, you might want to consider putting money into growth stock. If you have a long time horizon before retirement, growth stock makes a lot of sense. You might even want to put some money into mutual funds that invest in growth stock so that you will be able to benefit from professional management. Companies that are poised for growth can provide you with substantial returns on your investment. Many growth stocks triple, and quadruple, in value over the years. This means that you could end up living a very comfortable retirement if you chose the right types of stock. Be careful that you are not blindly investing in any growth stock that comes along. Try to do your homework and choose companies that appear to be financially solid.

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