Evaluating Your 401(k) Investments

While 401(k) plan sponsors take care to offer a choice of appropriate mutual funds,* a little extra research can help you pick the funds that are right for you. When researching multiple funds of the same type, you’ll want to compare different aspects of them before making your choice. Here are some features you may want to compare:

Easy or Easier?

Many 401(k) plans offer target date or lifecycle funds. These funds are designed to change as retirement nears, when you might prefer less risk. Make sure to compare apples to apples. Asset allocation and balanced funds may seem similar, but they are different.

Check the Fees

Even within a 401(k) plan, similar funds can have different fees, which will take away from performance. If all things are equal, you may want to choose the fund with lower fees. Another place to look for low fees is in index and exchange-traded fund offerings. These funds, when mirroring major indexes, tend to charge among the lowest fees because turnover is typically lower than for actively managed funds.

Research Over Time

When checking up on a mutual fund’s performance, look beyond one year and examine how it did over three, five and 10 years. Also try to compare similar funds in all market conditions.

Don’t Duplicate

If you invest in index, target date or asset allocation funds and you also invest in other equity and bond funds, make sure you don’t inadvertently invest in one sector or asset class more than intended.

Watch Your Company

Investing heavily in any company’s stock can prove risky and can result in unwanted market and security risk. Some publicly traded companies make matching contributions in their stock, which can make your company’s stock an outsized influence on your allocation. Make sure you spread your contributions around to other plan investments.

* You should consider the fund’s investment objectives, charges, expenses and risks carefully before you invest. The fund’s prospectus, which can be obtained from your financial representative, contains this and other information about the fund. Read the prospectuscarefully before you invest or send money. Shares, when redeemed, may be worth more or less than their original cost.