Should I invest in 401K or in the stock market?

Question

With the limited amount of money I have, I can either invest in 401K or in the stock market. What's a better investment strategy?

Answer 1

Retirement or Savings account is your question.
<401(k)'s invest in stock market>

1. You should at least contribute the amount your employer matches ... ask them, and if they match up to 3%, then invest 3% in the 401(K) ... this is your company giving you free money!!! Say your paycheck is $2,000.00 a pay period ... well if you're contributing the 3% the 401(k) will invest $60.00 from your paycheck (before taxes) and you're employer will contribute $30.00 for a total of $90.00 ... see you've already made 50%!!!

2. If your company does not match ... well, I'd skip it and start saving in a bank account/ stock market.

Reason ... people should have debt paid off ... then build up to 6-9 months of cash for living expenses (housing, utilities, food, some entertainment cash) ... then you can invest 1/2 of that saving into a mutual fund or into the stock market. Benefit here is that it's you're money and you can get it anytime you want ...

3. Once you've saved more into normal savings/ stock market ... then find ways to invest more into retirment accounts. Increase your contribution in the 401(k) ... see if your eligible for a ROTH IRA ... or a Traditional IRA.

Answer 2

If you have a limited amount of money then the "stock market" which I assume means individual stocks can be both risky and expensive even at a discount broker.

A 401k is sort of tricky. Usually the 401k is great if you work for a large employer and they provide some type of match. Small employers often have plans that charge high fees with lousy investment choices. The best thing about a 401k, though, is that you can invest a small amount of money and spread it around to maximize return and reduce risk.

Answer 3

If your company has a match program, go for 401k, if not look at opening a ROTH IRA (Assuming you meet the qualification of making less than 100k a year, or 150k with your spouse). Here you put money into this account after tax, but all earning that you make in that account are Tax free, assuming you keep the account till you are of retirement age.

If you are only thinking of 401k or stocks, 401k is probably better (forces you to build up a retirement nest egg), with the caveat that the funds you are allowed to invest in are diverse enough. If you are limited to company stock, or bad mutual funds, you might want to think about stocks, 403b, Roth IRA, Cd's, savings accounts, or other choices.

Answer 4

Well it depends on your age and your location and I guess we gould add in your life-style.

If your company as any type of match with your 401K, it would be silly not to fill it up to the point of them matching. SO if they match 25% up to $3,000, at least put in $3,000 because if you don't, you are leaving $750 on the table.

It also depends on your income and any other factors [IE children, kids college, health issues etc. etc.]

You can't save enough and when you retire, don't think you are going to get a nickle from the government if you are in your 20's. IF somehow Social Security turns itself around [highly unlikely] it will be all gravy and an added bonus. Do not depend on this for a source of income when we are all in our 80's eating cat food.

When you talk about putting money into the stock market and a 401K, they are in essence, the same thing. I don't know the exact choices you have with your 401K or what company you are working with so its tough to pinpoint exact funds. Typically if you are 20-something, take some risks inside the 401K. Put 75% or more into the stock market.

I would recommend setting up a brokerage account away from your 401K with a sharebuilder.com or scottrade.com if you have specific stocks or ETF's you would like to buy into away from your 401K.

And again, depending on the person, I would also recommend setting up a Roth IRA if you meet the requirements. That money goes into the account taxed and will grow tax-free with pretty soft penalties for early withdrawal, NOT that you want to do that.

Also, save to buy a house/condo. Its a decent time to get something with the market being over-saturated with listings.

Answer 5

I would say max out your 401k icontribution if you can. It is pre-tax dollars and it is also sometimes matched by your company. The matching can lead to a 20%-50% return right off the top. See if you can give us more detail about if your company matches or not. That is an important question.

Answer 6

You always want to think long term when you are investing for yourself.
I would diversify your investment...
I would do 5% in you 401K at work, and buy a 2 family, fix it up, live in one apartment, and rent out the other to help with the mortage...
Your 401K is the stockmarket.......

Answer 7

401k and put it in a fixed income fund. stock market is too volatile and real estate is leveling off, regardless of the hype

Answer 8

401K if your employer matches, up to the match.. then roth IRA up to the limit, any excess on the 401K

Answer 9

PROPERTY IS ALSO A CRAP SHOOT. 401K IS BETTER FOR A LIMITED AMOUNT OF MONEY PLACE IT IN AN AGGRESSIVE FUND.

Answer 10

Jennifer gave you your best answer. especially if corp matches