My sister works for a financial services company and seems to always be on the money, if you’ll forgive the pun. Last night she was explaining a few things to me about 401Ks, and I thought it would make a great blog post. I may know a thing or do about credit and debt, but I have to admit I’m a little hazy when it comes to investing. She explained things so well, that if I can understand it, anyone can.

1. Do Not Get into a Full Service Managed Account. The goal for managed accounts is to make your accounts diversified. This is a good thing when times are good. Managers move money around on a quarterly basis, but they do not do any kind of market timing. This means that the stocks in your mutual fund could be sold right after a big market drop, leaving you with a bigger loss than necessary.
2. Think About Doing a Managed Account with Advice. Most managed account services have different levels of service, and there is one that you may want to take a look at. If you want some control over your 401K, but don’t want to do a fully managed account or go the self directed 401K, you can get one time advice on how to invest for a small fee. You fill out a survey online and answer questions about your investing goals. You will be given recommendations online. If you like the suggestions, you can choose arrange your funds per the recommendation. The fee will be charged whether or not you want to follow the advice.
3. Do Not Stop Investing. The world is on sale, just ride this out. Max your 401k contributions, especially if you have 10 plus years until retirement.
4. Self Directed Accounts: A self directed account allows you to pick individual stocks using the money in your 401k. If you have big losses on certain stocks, take a look at the history of the stock. If it took a long time for the stock to get up to the level it was at the begiinning of 2008, ask yourself if you are willing to wait that long for the stock to rebound. If not, sell now and take the tax write off.
5. Don’t Do Anything When the Market is Moving Wildly up and Down. You could be selling low and buying high without knowing it. Wait for times of calm in the market.

Hope this gets you thinking positively about the coming year! If you have any other tips, for your 401K, leave a comment!

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