| 401 K and such
Posted: 6/28/2008 9:35:43 AM | Hello everyone,
I am wondering if you have any tips for the employee 401 K investment?
As a young professional, what works best for me? ( how do I allocate 401K)
P.S. I am able to invest 20% the most, company matches 6%.
Thanks, | |
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| 401 K and such
Posted: 6/28/2008 11:26:15 AM | As you are very young, you could allocate 60% or more of your funds in Small or Large Cap Growth Funds. These are high risk but provide the greatest returns over time. The rest in whatever you like... If your employer matches your contributions, invest at least 6% of your income, or whatever is the percentage is that they match. This will reduce your taxed income too, as the money is taken out before tax. This way you will have at least a 100% return on your investment (the match) , plus whatever earnings (or loss) the funds provide, plus the tax benefit.
It's good you are starting early, you are a smart girl. | |
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| 401 K and such
Posted: 6/28/2008 12:25:06 PM | | Thanks troubleahoy, how do u feel about my own company stock? How much allocation will be reasonable? | |
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| 401 K and such
Posted: 6/28/2008 1:29:42 PM | | Usually, your own company will sell you some of their own stock at a discount - say 10 or 15 %. Take it if you can spare the money, after you check to see how the stock is fairing in the market. (use www.yahoo/finance and compare their stock to say, the S&P index. The stock should have a growth rate , and be advancing more than whatever discount they give you to be profitable FOR YOU) .Usually you will have to wait 1 or 2 years before you can sell your company's stock or be "fully vested" but that varies. They must give you all the information to decide. Spend an afternoon reading the stuff. | |
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| 401 K and such
Posted: 6/28/2008 1:34:19 PM | Do you mean in your regular 401k, or an employee stock purchase program?
Is there any benefit to buying the company stock? A discount, etc? | |
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| 401 K and such
Posted: 6/28/2008 1:41:44 PM | | At your age, you don't need high-risk investments or large dividends, you want assets that perform reliably and steadily and increase your net worth over time. As you get older and the value of your portfolio grows you can add higher-risk investments, but right now you want growth. | |
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| 401 K and such
Posted: 6/28/2008 2:24:54 PM | | regular 401K is what I am talking about. | |
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| 401 K and such
Posted: 6/28/2008 3:22:48 PM | | Sortin: What I mention in Msg 4 is the employee stock purchase program. There is a discount for that usually. This discount is your immediate return, as you buy the stock cheaper than current market price. As long as the company doesn't go down the drain by the time you are able to sell these shares. | |
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| 401 K and such
Posted: 6/28/2008 10:32:21 PM | As you get older and the value of your portfolio grows you can add higher-risk investments, but right now you want growth
Actually the reverse is true. You should have higher-risk investments while you're still relatively young and are able to ride out stock market fluctuations. As you grow older (say after age 55) and begin to approach retirement, then you should readjust your portfolio's percentages for more safe haven investments over the riskier stuff. Your time frame to recover from stock market losses diminishes as you approach retirement. Even in retirement, you should still have some portion of your portfolio in growth stocks to offset any withdrawals from your investments.
The OP, being only 23, should have all her money in growth (risky?) investments. The amount of risk is entirely dependant on her ability to withstand the daily roller coaster fluctuations in the stock market.
Myself, I think I'll turn my portfolio into a partial gold brick and use it as a door-stop ... can't actually buy the whole gold brick at the current price. 
Thanks troubleahoy, how do u feel about my own company stock?
What exactly is the business of your company?? If it's the next Microsoft, IBM or Boeing, then *hell yeah*, park some money with your company. | |
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| 401 K and such
Posted: 6/28/2008 11:08:13 PM | The very first thing I would recommend is to read up on the subject yourself. Don't let the thought of investing scare you off as it is not as complicated as many make it out to be.
As far as your specific 401(k) plan... it would be impossible for people to give you anything other than very generic advice because every plan is different either in their investment options, fees, company rules, etc. The name 401(k) is just the section of the tax code that covers this, but every plan is different.
Giving you advice on what kinds of funds to invest in is pointless when NO ONE here even knows your options or the fund fees. It is possible (but not likely) that your company has one of those 401(K) plans that are quite bad and you may do better with a IRA or a Roth IRA.
As far as company stock... Most companies will make you put a certain percentage of their match in company stock, so you might not even have that option. But every plan is different, so only you know the specifics on that part. But one of the big keys in any portfolio is DIVERSITY! Don't load up on company stock because it is just one company and anything can happen. Ask the employees of Worldcom and Enron how their lack of proper diversity literally cost them tens of thousands of dollars. It doesn't even matter who you work for, one stock should never make up a large percentage of your portfolio.
Take all the advice you read on a message board on this topic with a grain of salt except for this ... educate yourself on the topic and make the decisions that are best for you based on your own knowledge and degree of risk. There are many books out there for a novice investor and it is worth taking the time to read.
Consider any money you invest though to be GONE for the next 40 years. A 401(k) plan is not a saving account where you can just withdrawal the money anytime. And if you do you get hit with penalties on top of the taxes, so it is always a bad idea to make a withdrawal unless you are in some serious financial straights. Even withdrawals to buy a home are almost always a bad option. | |
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| 401 K and such
Posted: 6/29/2008 7:46:09 AM | Sortin: What I mention in Msg 4 is the employee stock purchase program. There is a discount for that usually. This discount is your immediate return, as you buy the stock cheaper than current market price. As long as the company doesn't go down the drain by the time you are able to sell these shares.
The only problem with this is that when companies sell you their stock at the employee discounted rate, you are usually contractually obligated to not sale that stock for at least a year as compensation for the discounted price. So you really need to put aside any false hope that you may have for your company and really decide if it will retain it's value for the next year.
At your age, you don't need high-risk investments or large dividends, you want assets that perform reliably and steadily and increase your net worth over time. As you get older and the value of your portfolio grows you can add higher-risk investments, but right now you want growth.
Experts would completely disagree with this. If you plan on ever getting into high risk investments, they say it's better to do it while you are young and still many years away from retirement. With most high risk investment option, you can expect great gain during good years, but you can actually loose a bit of money during bad years. In the end, you usually make more than you loose, but that's why it's called high risk.
Low risk options are far more stable and almost always go up, but they go up at a very slow rate. You may only gain 2% a year, whereas with high risk, you may gain 13% some years. But the next year you may loose 5%. And the next, gain 9%. And so on.
High risk options tend to pay out well over a long enough period of time. That's why you should do high risk early if you plan on doing it at all. | |
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| 401 K and such
Posted: 6/29/2008 5:22:52 PM | Actually her risk ratio should be higher now while she is young and can afford the risk. When she gets older is the time for less risk.....as she nears retirement...............
OP A company 401K usually limits you in what equities you can buy.......and most match 6% as yours does. If you can allocate a mix of funds that would be the way to go......a company usually gives you a list and a risk assessment.........
GOO LUCK......Saving 20% of your income at your age is a wise move.............. | |
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| 401 K and such
Posted: 6/29/2008 5:42:12 PM | If possible, buy a house. If you have good credit now is a good time. Rent is the worst way to spend money. Just ask my tenants.
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| 401 K and such
Posted: 6/29/2008 6:58:51 PM | | Rswindol: Sure, some companies might require you to hold their stock for a period of time. But, you're going to sit on it until it goes to long-term capital gains anyhow. | |
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| 401 K and such
Posted: 7/12/2008 7:30:52 PM | I am a big fan of the high risk options, while you are young. You have the ability to recover from loss better. If you are patient (and dont panic), you can reap massive rewards from a high risk option.
My personal favorite? Forex. | |
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| 401 K and such
Posted: 7/12/2008 9:43:25 PM | Risky investment is pretty bad advice while in a terrible economy. How can you wait it out with risky investments if theres no money left to invest? Make the changes often, go conservative or moderate until the economy gets better then take the plunge to aggressive or very high risk if you want later (maybe in 2 years). Use the tools available where-ever - at the Fidelity site or where-ever. Research the past performance of the stocks you want to invest in. Steer clear of the losers. You know, you can change your settings all the time. Its their job to do what you want. I'd seek the advice of a financial advisor as well.
Keep a close watch on the pie charts of your investments.
Wow, 20% is a nice piece of change. You know, they say it takes over a million in savings to retire comfortably. Remember, you can still lose everything in a 401k if poorly investing.
Like was said, DIVERSIFY. Somebody who did risky has lost nearly a hundred thousand in the last year or so in their 401. | |
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| 401 K and such
Posted: 7/13/2008 1:43:00 PM | Risky investment is pretty bad advice while in a terrible economy. How can you wait it out with risky investments if theres no money left to invest?
The OP is 23. She has plenty of time to wait it out and if she's working, she has money to invest. 
Make the changes often, go conservative or moderate until the economy gets better then take the plunge to aggressive or very high risk if you want later (maybe in 2 years)
Not according to the Oracle of Omaha (aka Warren Buffett). His advice is to do the opposite of what market "sheeps" are doing. That is, if everyone is heading for the hills, that's when you should look for quality stocks at a bargain price. By the time the economy gets better (and everyone is coming back onboard), you've missed your buying opportunity.  | |
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| 401 K and such
Posted: 7/13/2008 5:40:34 PM | I think Wall Street investing and 401k investing are 2 different ways of investing.
Buffett can afford to lose his shirt on some investments. When Wall Street investing I think people kinda expect to lose money, when retirement investing it shouldn't go down much if at all. Maybe its just me, I wouldn't want to see me lose money ever.
Name-dropping Buffett is pretty pointless, I think he's the exception to the rule of Wall Street investing. | |
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| 401 K and such
Posted: 7/13/2008 7:57:58 PM |
I think Wall Street investing and 401k investing are 2 different ways of investing.
What do you mean by Wall Street Investing? All investing has the goal of increasing your wealth over time. Mutual funds offered in 401(k) plans generally are the same funds others invest in, just the tax penalties for the individuals are different. Investing is investing, there is no difference between people investing for retirement versus those investing just for personal gain. It's the same funds and people structure their portfolios for their own personal tastes.
And as far as name dropping... I'm surprised you even know who Warren Buffet is with the post you made. You ought to read his book(s). | |
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| 401 K and such
Posted: 7/21/2008 4:45:18 PM | but with this down market...I don't know if it is a good idea to put lots of in high risk funds... | |
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| 401 K and such
Posted: 7/21/2008 8:07:44 PM | | ^^^^^You invest your money according to your comfort level. If the high risk stuff makes you nervous, then stay away from it. The key idea is diversification ... allocating percentages of your money into different categories of risk. No one here is telling you to throw all your cash into high risk ... unproven companies. Most people aren't experts in investing anyway and don't have the time to spend 24/7 on their portfolio. If you're that type, find a financial advisor that you can trust to handle your investments. This person should be the only person you see on an ongoing basis with regards to your money and he/she would do a risk assessment on you to see how much risk you can tolerate. At the banks, you get to see whoever is on duty that day and he/she won't have the time to get to know your personal preferences. Bad choice. | |
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| 401 K and such
Posted: 7/21/2008 8:22:50 PM |
but with this down market...I don't know if it is a good idea to put lots of in high risk funds...
Well if there ever was a good time to invest, that time in NOW!!! If you invest long term, which is what a 401(k) plan is, there really is no better time to start than during a recession. You buy low and (hopefully) will sell much higher decades from now.
But my advice still holds... buy a good book on investing and educate yourself on the entire process. Make your own decisions that work best for you and not take the various advice off the message boards, including the above paragragh.
If someone offered you $100,000 to read a book, would you do it? Well learn about investing and it can possibly be the difference between blindly investing and investing with YOUR purpose in mind.
Would you just give your money to a stranger on the street and tell him to invest it for you? That basically what taking advice off message boards is, and it even hold true for financial planners. Unless they are 'fee only,' they money comes from commisions. They only make commisions by transactions, so your finanacial well being doesn't even matter to them if it comes between their pocketbook and your own. | |
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