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My 401k plan has a huge number of investment choices. Where can I find help on how I should pick where to invest in my plan?

Jan 04, 2012 by Toni from Kenansville, NC in  |  Flag
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7 votes
Michael Level 12

If you are part of a large corporation plan and it has as many choices as you indicate, there may also be an optional third party manager. Financial Engines is an example. They are a manager that will direct your investment allocations for an additional fee (typically I see .5% of your account balance).

If you are currently working with a fee based advisor and your employer plan is a significant portion of your overall net worth, they should be able to provide advice. Normally they will want to charge a fee for the service, but when you consider that most individuals accumulate the majority of their retirement savings inside their 401(k), it is often worth the additional cost. Ensuring your assets are properly invested to maximize the benefit of your employer plan can make a big difference in the long run.

Comment   |  Flag   |  Oct 26, 2012 from Jacksonville, FL

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5 votes

Your plan provider may have a consultant that will help you narrow down you investment selection based on your age, risk tolerance and time frame as well as other investments you have outside of the 401(k). I would also suggest discussing your 401(k) plan with your own financial advisor, who may be able to help you with an asset allocation for your plan.

Comment   |  Flag   |  Jan 05, 2012 from Boston, MA

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5 votes

Your companies plan should have a financial adviser that meets with the group and is available for one on one consultations. If they do not and you have not seen anyone stop by I would ask the HR person why? Good luck

Comment   |  Flag   |  Oct 24, 2012 from Port Washington, NY

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Mike Fleiner Level 13

Toni, many 401(k) plans still provide large investment menus that can be quite daunting for the average participant to negotiate. Your 401(k) provider maintains a participant website that you can log into, and review your account to explore your investment options. For most providers, you can simply click onto the fund you are interested in reviewing and it will bring up a fact sheet that can provide easy to read information about the fund. If this does not meet your needs, you can certainly use sites like www.morningstar.com. If you are really struggling to make an appropriate investment decision, you may want to explore using a target date fund. I would imagine your plan offers such options based on the size of the investment menu. If you require more customized investment advice, you can explore if your plan offers some sort of managed account service. However, there will be an additional cost for using such a service.

Comment   |  Flag   |  Mar 11, 2013 from Reno, NV

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Rich Winer Level 20

Toni, As the others have said, you should be able to obtain advice and information from your employer, HR department of plan custodian (who will likely have an 800 number). As plan sponsor, your employer has a fiduciary responsibility to ensure that you and other employees are provided advice, information and education about your retirement plan and investment options to ensure the suitability of the investments you select. Even with the available advice and information, most employees who are not experienced investors prefer the simplicity of selecting a "lifestyle" fund that matches their risk tolerance. These funds are essentially a portfolio of stock and/or bond funds selected by the plan custodian to meet specific investment objectives. Most good plans have a conservative, balanced, moderate, growth and aggressive growth lifestyle funds. Your plan custodian should also have provided you with a booklet to help you determine your risk tolerance and appropriate investments. While you could use Morningstar or consult with a financial advisor, your should take advantage of whatever is available to you from your employer or plan custodian.

Comment   |  Flag   |  Apr 12, 2013 from Woodland Hills, CA

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If an advisor is not available, you could vet each fund by checking in on Morningstar. They provide a rating for both mutual funds and ETF's. The link is www.morningstar.com. Just type in the ticker to receive a quote and analytics.

Comment   |  Flag   |  Mar 08, 2013 from Newport Beach, CA

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Ken Krausman Level 9

Hi Toni, If you've yet to find an answer that works for you, please contact me right away. Our firm offers a service that may do exactly what you are looking for! Contact me with your e-mail address and I'll send you a link to see for yourself. I can be reached at kkrausman@investwise401k.com Thanks! -Ken

Comment   |  Flag   |  Sep 06, 2013 from Bloomfield Hills, MI

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2 votes

That's an excellent question, Toni. If your 401(k) plan has dozens of different options, it can be hard to know which one is the best for you. As others have mentioned, talk to your company's HR department to see what resources are available to you. Also, I'd suggest carefully reading whatever information was provided to you when you enrolled in the plan. There should be details about all the different investment choices. There may even be a quiz or other tool that you can use to help determine which investment options are best for you.

Some of the funds may be "target-date" funds generally designed for people who will be retiring in a certain time frame. For example, if you are in your early 40s and plan to retire at age 65, a target-date 2035 fund (the year 2035) would provide a diversified portfolio for your time horizon to retirement. Target-date funds become gradually more conservative as you get older, so they are "auto-pilot" funds. Some of the funds may be "strategy"-type funds such as aggressive growth, growth, moderate growth, conservative, etc. A "strategy" fund does not change its risk/reward profile over time and may also be a suitable choice for you. In both of these cases, choose just one fund, don't mix and match.

A financial advisor can also help. If your financial situation is complicated (for example, you have a lot of assets), I highly recommended working with a fee-only financial advisor. Even if you don't have a big portfolio right now, you should be able to find an advisor who charges an hourly fee and who can sit down with you and make personalized financial recommendations.

Best of luck.

Comment   |  Flag   |  Sep 19, 2013 from Township of Anderson, OH

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1 vote

I agree with other's advice to ask your financial adviser's advice, but I suspect you would have done that if you had one. The best two places online for you to check out funds yourself are Morningstar and Lipper. It may be worth it for you to pay a monthly fee, at least one month a year, for an upgraded membership at Morningstar in order to get the analyst commentary on the funds. If the number of your 401k choices is over 25 funds, I would start by looking at the funds in each category with the highest 5 year and 10 year returns. They should be the most consistent performers and that time period covers both good and bad markets. Make sure the manager has been there at least 3 years and that the expense ratio is average or better. Check the ratings and risk tab on Morningstar to see if the risk is above or below average. That should match your own assessment of how much of a risk-taker you are. Look on the performance tab to see how consistently the performance ranks in the top half - it needn't be all the time but you want to avoid funds that are hot for a year or two but cold otherwise. Finally, walk into a Schwab or Fidelity office and talk to someone to make sure you are on the right track. It's a lot of work to research your choices but it is very important to know what you're doing or get some advice on something that may greatly affect your retirement.

Comment   |  Flag   |  Apr 23, 2013 from Charlotte, NC

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1 vote
Joe Soto Level 15

Hi Toni, Just more food for thought. I would start with looking at and reading your enrollment kit. This should help give you an idea of what kind of investor you are and what kind of lineup (stocks vs. bonds) you should have. From there I would contact the advisor to your 401(k) plan and verify your findings and ask any questions you may have. Lastly, talk with a financial advisor outside of your plan to give you a second opinion. By doing it this way you will learn how your 401(k) works and what role you should play in it.

This way you educate yourself threw small steps and a plan of action.

Hope this helps.

Comment   |  Flag   |  Aug 28, 2013 from Burbank, CA

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