Do you buy and sell funds that your company offers in a 401k?

Question

I am being told that in a 401k the "funds" you invest in when you do fund transfers/or reallocations you are actually buying and selling those funds, is this correct? We are not able to take the money we make from it and run with it, so I fail to see the common factor in this than stocks. I feel this statement of buying and selling funds are miss leading because how can you sell something you don't have yet, or how can you buy something that is based on stock market price not what someone is selling as. ???
Please help me understand.

Answer 1

Yes, you are actually buying and selling those funds during fund transfers and reallocations. It's done exactly like the stock market...in fact the stock market determines the value of the mutual fund.

At the close of the stock market every day the mutual fund company will total up the value of all of the stocks, bonds, and cash that they have and divide that figure by the number of shares outstanding to get the Net Asset Value (NAV) of the fund. Transactions made up until 4:00 pm eastern time (close of market) will take place that evening based upon that days market prices. Transactions made AFTER 4:00 pm eastern time will take place the following day based upon market activity the next day. This prevents someone from being able to "time" the market. In this regard it's treated exactly like the stock market except the window that the transactions actually take place is after the market closes and each share is bought and sold at exactly the same price rather than at a price that someone is willing to pay for at that exact moment.

Answer 2

A mutual fund is a portfolio of stocks that hopes to fulfill the objective of the mutual fund. You are buying and sell shares of a mutual fund. It is similar to a stock but it is more diversified. Diversification helps to reduce your risk down to market risk, which is not diversifiable. When you buy a stock, you can choose to have a stock certificate issued but most people don't do that because it's risky. If you lose that stock certificate then that's it. It's gone. It is more time consuming if you want to sell it as well. You need another document along with the stock certificate. It can take at least a week before the trade will go through. Most people just let the bank or investment company hold the certificate. Ownership is done electronically.

The money a mutual fund makes is put back into the mutual fund. Your shares should increase in value. Mutual funds generally fluctuate less often than do individual stocks and that's usually viewed as a good thing.

You should limit the activity on your retirement accounts. You shouldn't treat them like a brokerage account. Also the more often you trade, the greater your costs are. That affects your overall rate of return.

Mutual funds are for people that do not have enough money to keep a diversified portfolio of stocks. Your money is being pooled with other investors.

Answer 3

My 401k is divided 3 ways in different funds. You look at the history of the funds for say 5 years and see trends in the ups and downs. One may do better at a diffent time of the year. So prior to this time of year while that fund is up you take this out and put elsewhere even in a bond fund. Then you keep track and a month to a few months when you see in the history it normally goes back up you reinvest in the fund. Just remember you get penalized if you move to often. Just go through all the stocks and see who has the best return in a five year period and try that one for starters. Then research and look for trends of when some go up in down. You do not get money out but the amount you have grows better. I know people that have made 15-25% year todate in interest.

Answer 4

As far as my understanding goes, the provider of the 401K has a series of options, such as you can select a percentage of your contributions to go toward things that are High, Medium or Low risk areas, the provider decides on the stocks, not you. Its part of a portfolio and while you may see short term losses in the balance the idea of a 401K is long term results. To best understand your companies plan, get with the representitive of the company who is providing the 401K plan as well as your payroll department and ask very specific questions until you feel satisfied with the answers.

Answer 5

i will take some assumptions. You pronounced small investor, I study youthful. If youthful and have the time i agree carry. you're nonetheless including each and every pay and buying 3 and four circumstances as many shares now as you have been once you have been satisfied with the return. 2nd assumption. Tanked great time, reads to me that once to procure in you regarded at previous returns 02,03,04,05 and pronounced wow this fund is staggering, now the fund is tanking. in case you have any extra than 20% i'd carry all of it the way down to 10 or 15% and extra pass to US great Cap or US great Cap growth. right this is the main, the quantity you're at the instant putting into the Tanked Int'l fund now , we could say 10% bump it as much as twenty% in that fund and be procuring low each and each month and you will get well swifter. traditionally, yet do no longer go loopy, small and mid length outperform popping out of a "undergo" marketplace, and my well-liked or third place and holding longer is US great Cap growth

Answer 6

Yes, if you shift your fund allocation and/or selection within a 401(k) plan, you are buying and selling shares. And yes, you cannot "take the money you make and run with it." The entire transaction stays within the retirement account. I can't grasp what statement you think is misleading.