5 Ways to Keep a Balanced 401k Portfolio

Maintaining your 401k is by far one of the most important things you can do for a financially safe retirement. Most employers, at least at large companies, offer 401k matching programs which makes signing up for a 401k even that much more appealing. The problem is that most people do not rebalance or reallocate their money over the years and end up cheating themselves out of great returns. Below are 5 important investment strategies to keeping a balanced 401k portfolio.


1.Diversify and Reallocate

While that words get thrown around like pocket change most people do not stop and actually think about what that practically means. Back around 2000 people thought tech stocks were the road to riches and put all their eggs in one basket…we all know how that turned out. Furthermore, with the current economic climate over the past few years we have once again learned the importance of diversification. Depending on your age and your financial goals you want to make sure that you have a strong mix of stocks, bonds and other assets and investment vehicles. The younger you are the more risk you can handle. Therefore if you are starting out young you should be investing a greater amount in stocks and mutual funds. As you age you want to reallocate funds to bonds and other fixed-income investments. Whatever you consult a professional to make sure you have a diverse portfolio that will protect you from the unexpected.

2.Don’t Overinvest in Your Company

Your 401k should be more than just stock in your company, especially if you own stock independent of the 401k. Treat your company like any other investment and analyze its financial health and stay current on annual reports and quarterly profits.

3.Seek Financial Advice

We touched upon this briefly in the first point but I can’t stress enough how important it is to consult with a financial advisor. After all, you have your realm of expertise and they have theirs. Just make sure to do your homework to ensure you consult a trustworthy professional.

4.Know Your Analysts

Don’t just educate from your company and financial advisor, check a variety of reports from well known analysts that will give you a well rounded and fair assessment of your company’s value. Combine this knowledge with the company’s reports and advice from your financial advisor and you will have a complete understanding of your company as well as the rest of the investments in your portfolio.

5.Focus on Funds

If you do not have the time and inclination to constantly buy and sell positions in your 401k than investing a variety of well rounded mutual funds is the best way to go. There are index funds, large cap funds, global funds; the list goes on and on. Expose yourself to domestic and global markets and a variety of stocks. A well diversified fund can provide a great balance of risk and reward.

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