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For most people, investing is not their thing. You might think its your thing but your thing is what you do from 9-to-5. So, if youre new to investing or dont really understand much about investing, then consider using the index funds in your employers 401(k) plan. Index funds, as opposed to funds that are actively managed by an investment professional, track a specific index like the S&P 500 (an index of large companies) or the Russell 2000 (and index of small companies). The expense ratios are generally lower in index funds and thats why it is really hard for actively managed funds to perform better. (That and the fact that fund managers are sheep.) Studies show that most actively managed funds cant outperform these indexes over the long term and the Vanguard Group has become the largest mutual fund family in the world based on this philosophy.

Ideally, youll have an index fund for each of the main asset classes in your plan (international, small-cap, mid-cap, large-cap, bond). Using index funds for the bulk of the money in your account is not a bad place to start.

Dont throw darts at a board. Read Sun-tzu, The Art of War

Every battle is won before it is ever fought.

Some people get so confused by the list of investments in their 401(k) that they feel like they are throwing darts at a board when they enroll in their plan. Other people look at the most recent returns of the fund and load up on the ones that have been hot lately. Thats called chasing the yield and its like a dog trying to catch its tail.

So what do you do? Diversify. Pick four to six funds in different asset classes (international, small-cap, large-cap). Look to the index funds first. If there are no index funds in a particular asset class, look at who has had the best long-term performance (usually this will be represented by a 10-year average). Then stick with that mix. No matter how much you try to slick your hair back or say money never sleeps, youre not Mr. Gekko. So youre not going to rack up huge gains by moving in and out of funds on a daily basis.

Diversifying and holding on for the long term is a boring strategy but its a smart strategy. Stop obsessing about your 401(k) and stop looking at your account online every day. Do something constructive instead. Read Sun-tzu.

Its all about bucks, kid. The rest is conversation

Three things that will determine how much you will accumulate in your 401(k): 1) how many years you save 2) what interest you make on your investments and 3) how much you save. The third is the one you can control right now. So put more money in your 401(k).

Investing is all about forgoing consumption. That means you buy less toys today so you can afford to buy more toys tomorrow. Look to increase your 401(k) contributions gradually. If you can do the maximum ($16,500 in 2010), thats great, but try to at least get to 10% of your pretax income. And above all, if your employer offers a matching contribution, contribute at least enough to get that match.

learn from gordon gekko

Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA.

Greed might be good. But common sense isnt such a bad thing either. Dont go crazy fretting over your retirement plan. Get the basics right and youll be OK.