What are the most important things to consider with your 401K?

Because the market has been making such radical swings—I predict we’re due for a drop soon—I’m sticking to a conservative investment approach. You may make less when the market goes up, but probably lose less when it goes down. But remember… up’s and down’s are the nature of the beast and I think it’s always wise to invest as much of your gross income as you can, because despite how it’s gotten battered as an investment, a properly managed 401K still one of the best and safest investments around. This is especially true if your employer matches funds.

I would save aggressively and invest wisely. The stock market is really low and historically undervalued and once this economy starts firing on all cylinders it should experience a nice bounce back. Diversify your portfolio and just keep putting away the most you can afford to.

Don’t put it all in one fund is my advice. True the point of those funds is the fund itself is diversified, but it is still run by a fund manager who is making decisions on buying and selling. I agree with contributing to your 401k, especially if you have a company match. If your income allows you to do a Roth IRA I think that is a great deal. Some IRA’s allow you to even do things like CD’s. A rule of thumb is at 5% money doubles in just under 15 years. CD’s are not at 5% now, but it is something to remember for the future.

Check to see what fees are charged by the various funds.

put in the max amount you can. You won’t miss it and it goes in before taxes, so it reduces your tax liability.

diversify as best you can without overlapping. I have a growth fund, an S&P 500 fund, an international fund, and a low price stock fund. at your age you can invest more aggressively, depending on your risk tolerance.

the great thing about a 401 k is that you are buying even dollar amounts on a regular basis. So when the market drops, your portfolio value drops, but the new shares you buy are a lot cheaper than the ones you bought before. When the market recovers your portfolio will grow faster.

It is wise to put as much money as you can into your 401K. Do remember that, although it reduces your tax burden now, you will pay taxes on it when you retire. ’

In terms of investing, you need to pick a theory, and then stick to it. If you are going to be aggressive, you need to stay the course—not trying to pull out if things get bad. It is almost impossible to time the market effectively.

Once you choose your strategy, you need to select a fund that fits your strategy. Sometimes you are constrained in your choice of funds. Others allow you to choose any fund you want. It is best to choose funds that manage with as little churning as possible. Also, they should minimize the administrative costs. Every little bit of savings allows your money to increase more quickly, and over the time horizon you have, that can be very significant.