401k Investment Terms: 100, 60-40, 40-60, Load Funds

The process of 401k investment can be confusing if you do not understand common investment terms. For example, many people do not understand what 100, 60-40, and 40-60 load funds are. Here are a few things to consider about these types of funds.

Percentage of Equities

The main thing you need to remember with these terms is that the first number refers to what percentage of a fund is made up of equities. For example, with the 100 fund, the entire mutual fund is made up of stocks. With a 60-40 fund, 60% of the fund is made up of stocks and 40% of the fund is made up of fixed income securities such as corporate bonds. With the 40-60 fund, you have 40% equities and 60% fixed income securities.

Investment Considerations

Typically, you will need to be aware of what percentage of a fund is made up of stocks depending on how much time you have left until retirement. If you are early on in the process of saving for retirement, you may want to consider investing in a fund that is made up completely of stocks. Midway through your investing, you may want to switch to a 60-40 mix and eventually a 40-60 split. This will effectively lower the risk of your portfolio as you go.

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