401k Investing: The Best Strategy for Most Investors

In 401k investing, many people do not know which path to take. Here are some of the best strategies to use for the majority of investors.

Index Funds

One of the best ways to invest your retirement dollars is into index funds. Index funds are designed to replicate the movements of the stock market overall. Historically, the stock market has always increased in value over the long term. This means that you do not necessarily have to beat the market in order to have enough money to retire. Use index funds to track the market, and you will come out ahead when you retire.

Asset Allocation

When you are investing for retirement, the individual securities that you choose are not as important as how you allocate your resources. You need to come up with the perfect mix of investments between stocks, bonds, mutual funds and the money market. Depending on your age, you need to decide how risky you need to be with your investments. If you are younger, a portfolio of mostly stocks is a good idea. As you get older, you might want to shift over to bonds. If your 401k offers a target date fund, this can be a great way to automate this process of asset allocation. Your investments will automatically become more conservative as you get older.

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