Home > Financial Help > 10 Tips To Manage Your Personal 401k

The 401k is a common investing tool with many companies offering this option for retirement investing.  Its often managed by employees themselves.  But most of the time employees have little to no knowledge of investing and therefore are susceptible to making a wide range of mistakes that can impact the growth of their assets. But, follow these 10 simple rules to managing your personal 401k and youll do just fine.

1. Take advantage of free money and participate

If youre on the fence about investing in a 401K youll want to think about the free money you may be losing.  Some employers provide matching up to a certain percentage of your investment.  This is free money were talking about!  Make sure you invest up to this minimum even if youre still trying to save for emergencies and pay off debt .  Keep in mind, only do this if youre still able to make forward progress on these other important goals.

2. Dont be afraid to seek assistance from an expert

While a 401k is a self-managed retirement plan, dont ever think you have to manage it on your own.  Just because your friend in the cubicle next to you brags he should have been a financial advisor given his 401K returns doesnt mean you have to accept the same level of responsibility.

Take advantage of the financial management company your employer uses and seek advice on the right investment allocations for your situation.  Better yet, conduct some research, talk to some friends or family and find a financial advisor who you can trust to help guide you in the management of investments.

3. Review your investments, but not too often

Its easy to get into a habit of reviewing your investments regularly, but you need to keep a long-term strategy in mind.  Again, your buddy next to you may be touting his return last month, but ignore him!  A good rule of thumb is to review at a maximum each quarter (if you like to look often) and no less than once per year.  This could mean you visit with your financial advisor, or review the investments yourself.  But bottom line, avoid the temptation of logging into your account everyday.

4. Ignore market panic

Obviously, with the recent economic down-turn many investors jumped ship fearing large financial loss.  If youre the type of person who gets worried based on the latest economic news or results from Wall Street for the day, you need to find some ways to turn off these fears.  Accountability is probably one of the best ways I can think of to help you do this.  Again, find a trusted financial adviser who can talk sense into you when youre thinking about getting out of the market too soon.  But another bright idea is to limit your exposure to media such as news, magazines and the internet.

5. Dont wait until the right time to invest

Truthfully, there is never a right or perfect time to start investing .  Just get started.  Its sort of the same principal as having children.  If you wait until the right time, youll never have them.  Dont think you need to wait until you have more money coming in each month.  Train yourself to manage whats remaining after your investment.  My advice take care of the basics (1 month emergency fund and debt) and then get started  investing.

6. Reallocate investments

Most wise investors will try to allocate across different investments based on their situation and retirement investing strategy.  Some people go overboard with reallocating each month, but you only need to do this once per year if you want to keep your allocation mix.  This is a simple thing to do through most accounts when logging in via the web.  There is typically a page in which you can view your current allocation and rebalance with the click of your mouse.

7. Choose your funds wisely

Okay, if youre a novice investor who is managing your investments yourself, you need to make sure you choose them wisely. Its easy to invest, but not so easy to choose the right investments sometimes.  Websites like MorningStar.com can help you identify mutual funds with 3 5 years of good return history.  You also need to consider the right type of investments for your situation and investment strategy.  This will differ per individual, but a good financial advisor can make recommendations for you based on your goals and a number of criteria.