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Originally Posted by Rick D
Ok Greg, I've got a question and tried to look through here but this tread has gotten so big it's harder to find some of the info.
I've got some cash to start investing and I think I've i got a good idea from in here as what to do 
My question is what can I do to make my 401k work better and grow faster? I've done what their web site has told me todo but it really doesn't do much from a growth stand point, sure it grows from my and my company's matching contributions, but only a little (from what I can tell) from the investments?
If this has been covered already then maybe someone can show me the post?
Thanks Newbe invester!!! |
The reason for the 500 f'n pages is because people come and go - and ask the same questions repeatedly. So things get covered over and over... Which is perfectly fine as far as I'm concerned.
Okay -- your - and most peoples - 401K's are usually MUTUAL FUNDS... mutual funds are the pablum of investing. They're built on some basis such as one can label --- Growth Fund... or Income Fund... or Large Cap or Small Cap. The FUND then invests the money in the shares that meet that criteria. They are not allowed to invest in anything outside the preset criteria. So if you're into a fund that is "Small Cap" --- and small cap is out of favor this year.... and that fund sucks... and it will offset the growth of the other fund you may happen to own which is doing okay.
FUNDS --- Are generally loaded up with the "Top 10" names in their investing criteria... and then have maybe 90 or more names in the fund. The problem with this type of investing is that the top 10 might be the lead horses - but they're trying to drag along the 90 dead horses. They also have management fees - as they have salaries to pay to manage the 90 dead horses... and your company has costs associated with managing the plan etc. These all affect your return. Negatively not positively!
My deal here - which has been repeated a gazillion times is that all a guy has to do is to research what the top 10 are of the fund he's thinking about... and just buy the couple top ones in there -- and build your own mutual fund - that isn't dragging along 90 dead names with it.
Now -- there's more to it than that. Some company plans won't allow you to invest in individual stocks. Some will. Some make you ask the plan administrator to allow you to do this. Depending on the size of the company etc that can be a big hassle... or not.
My advice is that if you get a matching amount --- then depending on that information - put in the amount that gets matched --- and then open a ROTH IRA or an Individual IRA outside of the work plan and start to contribute to that as well as your company plan. This all depends on how much you have to work with - what your income level allows you to do (there are IRS limits) etc.
The brokerages - such as TD Ameritrade - or Schwab - or some other discount broker usually are pretty well versed in what you can and can't do and will help you setting up and getting started etc.
WHAT you invest in depends on your age - income - tolerance - goal - family. A single guy making 200K a year that's 30 years old can afford to toss some money in chasing the big score... Alibaba - or FaceBook - or GoPro of the world. A guy with half a million bucks invested already that has 3 kids approaching college age and he's 50 -- should be thinking more safety and compounding. Safety SHOULD NEVER be confused with DEAD MONEY. That's where people tend to screw themselves. We want to invest long term - for growth of our capital and as large of TOTAL RETURN as possible.
Remember that you might retire at 65 but you don't stop living then. You probably will live another 25 or 30 years....so if a guy is 50 now -- he's got 40 years of INVESTING ahead of him. People start to buy bonds and other stupid "SAFE" investments that don't grow and then they find themselves running out of money 5 years after they retire. F that!
We have INFLATION. We have property taxes that go up every year. We have medical costs that are out of control (thanks to the dickhead in charge). We have roofs that need to be replaced and houses that need to be painted. When I was in high school - gas cost .21 a gallon.... now I pay 20 times that!
Without some details of what you're already in to... it's hard to look at a more detailed explanation. Feel free to PM me or get my email <preferred> from a mutual friend here... and I'll show you how to look at your mutual funds in detail if you don't care to post them here. Nobody needs amounts -- just names or trading symbols.