Are you new to 401(k)s? We’d like to simplify how you choose the investments in your 401(k), because if you are not yet investing in your 401(k), or are afraid to invest more because you aren’t confident in your investment choice, then you could be missing out on a more prepared future.
There are two main approaches, and one of these approaches makes this whole process very easy for you.
First, you could choose the default investment option, also known as an age-based investment allocation. This is typically in the form of a target date fund. Sometimes this is called a lifecycle fund.
Target date funds have predetermined investment mixes depending on the date you plan to retire. The funds will automatically adjust the amount of volatility and risk as you move towards the target retirement date. This option means you can select just one fund and have intelligent diversification. If you want to keep things simple, start here.
The other thing you can do is choose a custom investment strategy utilizing multiple funds from what's available in your 401(k). These funds might range from conservative to aggressive, with nothing attached to your age. Or, they may be funds that invest in asset classes such as large companies, small companies, bonds, real estate, and many variations or mixes of these assets.
If you go this custom route, be sure you fully understand the short-term volatility of the various funds you are selecting. By having a handle on how quickly and violently they can increase and decrease in value over the short-term, you may end up with great results over the long-term.
No matter what your experience level is with investments, the most important thing is that you choose something to get started and develop the key habit of saving towards your retirement. You can always change your investments over time, so even the super simple target date funds are a great place to start.
Of course, if you would like help navigating this decision, feel free to reach out to us any time!
The content and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation. The information has been obtained from sources we believe to be reliable, but we cannot guarantee its accuracy or completeness. Past performance is no guarantee of future results. The opinions and views expressed here are for informational purposes only. Please consult with your tax and/or legal advisor for such guidance. Investment advisory services offered through Catalyst Wealth Management, LLC doing business as Ridgeline Private Wealth. Catalyst Wealth Management, LLC and Ridgeline Wealth, LLC are not affiliates.