Harness Money

Mutual funds are the most common investment option within 401k plans. Most 401k providers offer investors a select list of investments to choose from. These offerings are carefully curated by the providers based on the fees they receive. 401k providers receive a fee for offering funds to investors. The funds then also take a fee.

Fees are very common within 401k plans.

You generally pay a monthly fee based on the assets within your plan and then pay a fee to the fund managers and then pay any fees related to withdraw or transferring funds. The fees add up.

I try to reduce the fees I pay as much as possible. This is one reason whenever you leave your work you may consider transferring your 401k assets to a traditional IRA which you have control over and will pay less fees. The more funds you are invested into the more fees you will pay.

Your 401k is similar to your other financial portfolio. Ask yourself the question: What level of risk am I comfortable with? When do I need this money?

401k plans often offer some type of bond fund, which can be used to protect your principal investment, but will not grow very much.

Keep in mind bond funds do decrease as interest rates increase. They are not completely immune from an economic downturn.

I am relatively young, in my 30s and I know that I will not be touching my 401k investments for many years. I can afford to take a little bit more. And I prefer stocks rather than bonds.

I only have one fund in my 401k: PRGFX – T. Rowe Price Growth Stock Fund. 

This fund is diversified into the largest stocks on the market. GOOG, AAPL, MSFT, TSLA and many more.

If I were approaching retirement I may add one bond fund to provide a little more stability. But it is unlikely. If I keep investing into this account for 30 years till I reach 65 there will be plenty of money within this account to take care of my retirement needs.