This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Select the 401(k) Funds That Help You Most

By Mike Lewis

NEW YORK (Money Crashers) -- Unless you are self-employed, the investment choices for your 401(k) are established by your employer. While you have at least three options, the average plan offers eight to 12 investment alternatives, including the default investment if you fail to make a choice, according to the Financial Industry Regulatory Authority.

Debbie DeMatteo, chief investment officer for investment adviser 10-15 Associates, claims that 40% of plans even offer brokerage accounts, which means you can choose from a full range of stocks, bonds and managed and unmanaged funds, as well as other types of investments. This plethora of choices can be a problem when determining which path is best to achieve your retirement goals.

Your fund management philosophy

Benjamin Graham, Warren Buffett's mentor, believed there are two kinds of investors:

Must Read: How to Make Your Etsy Business Pay Off

  • Active or "enterprising" investors. These people are willing to invest the time and effort to understand the complexities of various investments and keep current on the economy and events affecting those investments.
  • Passive or "defensive" investors. Such investors lack the time or inclination to make a substantial personal commitment to managing their investments and are willing to accept an average market return or pay someone else to manage their funds.

Graham, who has been called the "father of investment analysis" and the "Einstein of money," detailed his philosophy and methods in two classic books, Security Analysis written in 1934 and The Intelligent Investor in 1949. His three principles of investing remain valid for anyone seeking to maximize their investment returns.

  • Invest with a margin of safety. Graham believed that minimizing downside risk was just as important as seeking high-return opportunities. He advocated keeping a portion of each portfolio (25% to 75%) in fixed-income securities, depending upon prevailing market conditions.
  • Expect volatility and profit from it. The price of investments reflects human emotions, not necessarily the true economic value of the underlying asset. Graham advocated diversification to reduce portfolio risk as well as regular periodic investment as a method to resist emotional pressures or group-think to buy or sell securities.
  • Know what kind of investor you are. Are you an active or passive investor? Do you spend time daily keeping up with your investments? Weekly? Monthly? Do you do your own research or rely upon others? Do you listen to contrary opinions or go with the herd? Understanding your own capabilities, limitations and risk tolerance can help you decide on the investment strategy that is best for you.

Graham also pointed out that while speculation (buying an asset in anticipation that someone is going to pay more for it later) and investment (buying a piece of a business and letting it grow) are different investment philosophies, being successful in either approach requires considerable expertise and experience. In other words, passive investors are unlikely to beat the market's average return as either a speculator or investor.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $110.38 0.00%
FB $92.07 0.00%
GOOG $626.91 0.00%
TSLA $247.57 0.00%
YHOO $30.71 0.00%


Chart of I:DJI
DOW 16,472.37 +200.36 1.23%
S&P 500 1,951.36 +27.54 1.43%
NASDAQ 4,707.7750 +80.6910 1.74%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs