Here we cover some 401,000 investment ideas for 2015, 2016 and beyond, as good money management during this time could make or break your retirement plans. Why have most investors done well in these plans in recent years when few really pay much attention to asset allocation or management? money? Let's take a look at some 401k investment ideas that you might want to consider right now.
Asset allocation is the name of the game in 401k investing, and most plans offer three or four BASIC choices. In order of risk, from highest to lowest, they are: equity funds, balanced funds (like target retirement funds), bond funds, and money market funds. Some also offer a secure stable account that pays interest. Target retirement funds are very popular because they handle money management and asset allocation for you based on what year (like 2040) you plan or expect to retire. With these funds, you don't need any investment ideas; you keep buying and holding, right? Think again.
Over the past few years, equity funds have been king due to a strong stock market, but bond funds (with less risk) have produced good steady returns for many years. Target funds with higher retirement dates (our example being a 2040 fund) have performed almost as well as equity funds in recent years for a reason. Their professional money management involves mostly holding equity funds in their portfolio with the rest invested in bond funds. What would happen to your 401k investment results if the stock market fell with interest rates rising in 2015 and / or 2016 as expected? You will likely experience losses in everything except money market funds and stable paid accounts.
The key to good management of 401k money is to avoid heavy losses, especially as you approach retirement. Falling interest rates have been the trend for over 30 years. When rates go down, bond funds make money. When rates go up, they lose money. Many investors who currently invest 401k have experienced significant losses in equity funds over the years, but few have actually lost money in bond funds. Sometimes the best 401k investment ideas are all about getting higher returns. For 2015 and beyond, defensive investment ideas aimed at protecting the value of your portfolio may be more appropriate.
First, look at your last statement and see where your money is. In other words, look at the asset allocation percentages in your portfolio. Allocation percentages may wake you up to the fact that you are more heavily invested in equity funds or target funds than you realize. The value of equity funds has increased by over 100% in this latest bull market. We have had two bear markets in the past twelve years that have halved the value of equity funds, after strong increases in stock prices. One of the best investment ideas for good 401k money management in 2015 and beyond: if you are not comfortable with your allocation. 39; relatively high assets in stocks, reduce your holdings.
Bond funds and short-term target funds (like the 2020 target or lower, which invest quite heavily in bond funds) are not as secure as most investors think. If you've relied heavily on them in the past, don't let complacency cloud your financial management judgment. If interest rates rise significantly in 2015 and / or 2016, bond funds will give investors the first big losses they've suffered since the early 1980s. If your allocation is assets to these funds is high, you may want to reduce your holdings, just in case.
The truth is, great ideas and investment opportunities that will get you more money are scarce these days. The stock market may continue its uptrend and interest may remain near record lows for years to come. But we're talking about investing 401k here, and your future retirement could be on the line. So what great investment ideas are there for the money you take out of your funds. Stocks, bonds and 401k targets?
Your 401k plan should have a money market fund and possibly a safe stable account that pays interest. Both are safe havens and great investment ideas for reducing portfolio losses if times get tough. At today's low interest rates, money market funds pay next to nothing, but their payout automatically increases as rates rise. Don't overlook your plan's stable account if you have one. You might be able to get around 4% interest. You can't find a better secure rate anywhere else.
Let's say your 401k account is worth $ 100,000. Would you rather risk losing half that amount or half of a lesser amount, like $ 50,000? Good money management and good asset allocation requires planning. Don't ignore your 401k. In the future, when the stock market is lower and interest rates are higher, there will be plenty of investment ideas and opportunities again. For 2015 and maybe 2016, the best investment ideas will be geared towards increasing security and reducing risk in your 401k asset allocation.