Learning how to invest in 401k is something that comes up time and time again. It is one thing to contribute to a 401k, but another entirely to put your money into the right investments. Just because you are taking advantage of a 401k does not mean that you are necessarily making all the right decisions with the allocation of your funds. The best way to invest your 401k fund is based on many factors. Some of the most important factors include your age and how long you have until retirement. The closer you are to needing the money, the less risk you should be taking. If you are not going to be retiring for 10 years or more, you can afford to invest the majority of your money in individual stocks or mutual funds. But as retirement closes in, you should shift your investments to ensure that you are not taking too big of a risk.

Company Contribution

If your company matches your 401k contribution, you should learn how to invest in a 401k as soon as possible. Those who opt against this are leaving a lot of free money on the table. Many people only contribute up to the maximum of their company match. This way they are taking full advantage of the free money without tying up all their money in one account.

Know your Returns

Investing your 401k funds is not something that you set and forget. Every year you need to analyze the past, and determine what the future holds for you and your money. If your 401k is not performing up to your standards, it may be time to change the way that you are investing. You do not want to obsess over the up and downs of your investments, but you do need to review your account at least once per year.

Search for a Balanced Fund

Are you the type of investor who wants to play it safe? If so, you should invest your money in a balanced fund. In most cases, this works out to approximately 40 percent in bonds and 60 percent in stocks. With this approach, you never have to worry about the natural downswings of the market because your money will be safer than if you invested in other ways.

Beware of Company Stock

While there is nothing wrong with investing in company stock, this should only be a small portion of your 401k plan. In the past, before the Enron scandal, company stock made up nearly 20 percent of all 401k funds. This number has fallen over the past decade and currently sits at 11 percent.

If you need advice on how to invest in a 401k, you are not alone. Rather than make a mistake that will affect your finances for years to come, take the time to learn more before you allocate any of your funds.

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