how would u invest ur 401k?

Answer 1

I agree with gregory_dittman, but let me add WHY I think stocks are the best place to invest 401k money. Assuming you are not already close to retirement, a 401k is a long-term investment. Historically, over long periods of time, stocks are the asset class that has provided the best returns - far exceeding so-called "safe" investments like savings accounts, CDs, money market accounts, Treasury bills, bonds, etc. In fact, after subtracting the taxes you have to pay on the interest, most of those things have barely kept up with inflation. So I think they are a good way to preserve money that you will need in the near future, but a poor choice for growing your money for a long-term goal like college tuition for a young child or retirement.

Stocks, on the other hand, historically have returned significantly more than inflation, with small company stocks doing a little better than large company stocks and "value" stocks doing a little better than "growth" stocks. The thing with stocks is that they go up and down, sometimes violently (like a couple weeks ago) and in order to get the long term benefits, you have to resist the urge to bail out when the market drops. If you do that, you will miss the rebounds that has always occurred. If you ever get concerned, look at this chart of the S&P 500 since 1955: http://finance.yahoo.com/q/ta?s=%5EGSPC&t=my&l=on&z=m&q=l&p=&a=&c=
There are ups and downs along the way, but the overall trend is clearly up.

Answer 2

Gregory gave you a pretty good answer. With a 401k you are limited to what your company offers as choices. That of course is a consideration. There is also the consideration of taxes. Everything removed from a 401k will be fully taxed, which is a big disadvantage of a 401k. So your strategy needs to take that into account. You can invest also in a Roth IRA, upto $4000 a year unless you are a very high income individual. Money removed from a Roth IRA is NEVER taxed if you wait until 59 1/2. So it makes some sense to put only so much into a 401k so as to receive the company match and stuff the rest into a Roth IRA.

Diversity of investments is the key. But since a 401k is fully taxed, it makes some sense to invest a portion of 401k assets into interest bearing instruments which would be fully taxed anyway. Normally, interest bearing investments are not very good investments but they do add stability and have a portion of assets invest thusly according to modern portfolio theory will improve your overall return and reduce your risk. So maybe 20% in interest bearing investments. You do need to consider investments in overseas markets also if you have the option. The dollar is acting like a dead duck, and our government seems to be encouraging that. So money invested in assets based on other currencies is something that should be taken very seriously. Maybe 25%. The rest as Gregory advises.

Answer 3

It depends on what the 401K offers and how well I knew what to do. In my 401K, I can choose between indexes and mutuals, but I can't buy individual stocks.

Right now, my new money is 50% Russel 2000, 25% SP 400 and 25% SP 500.

If I had no idea what to do, I would look at these new funds that go by several different names such as "lifestyle" and "lifetime" funds. Basically the stock to bond ratio shifts more to bonds the closer to the date of the fund which is the number after the fund's name. The idea is to pick the number closest to your retirement date. So I'd have picked "lifestyle fund 2040" (I turn 65 at 2034).

Answer 4

I put mine into an IRA. Right now that is working for me. However, I'm sure there are other alternatives. I really didn't research it much.