401k Investing: How to Pick Mutual Funds for Your Plan

Throughout the process of 401k investing, you will find yourself picking different mutual funds to invest in. Many investors have trouble deciding which funds to invest in. Here are a few things to consider about picking a mutual fund for your plan.

Investment Strategies

You will need to make sure that you understand the investment strategy of a fund before investing in it. Mutual funds use a variety of different investment techniques and not all of them are suitable for a retirement account. In most cases, you are going to want to invest in a mutual fund that provides slow and steady growth. Some mutual funds are very risky and will not be in your best interest when saving for retirement.

Expense Ratio

The expense ratio of a mutual fund is also something else that you will want to look at. The expense ratio is the ongoing fee that you have to pay for mutual fund management. You want to find a fund that has a low expense ratio so that it will not cannibalize your gains.

Historical Returns

You should also look at a mutual fund's returns over the last few years. Although a fund may not be able to replicate those returns, most investors prefer investing in a fund that has been successful in the past.

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