Understanding Your 401K and Stock Investments

I’ll be the first to admit - I am not the most fiscally responsible when it comes to saving and investing. Mostly, because I am intimidated by the fact that I don’t know what’s going on.

When it comes to life insurance, the stock market and my 401K, my previous approach was just signing up for whatever.

I find that most resources out there explaining what to do are way over my head and it takes a lot of time to monitor what’s going on.

However, I’m embracing the complexity recently and diving right on in!

If you’re young, it’s time to make calculated risks with your finances.

Invest more than what your company vests or matches in your 401K. Why? Because you can just pretend like that’s not even money that would come out of your paycheck and better to earn on it than just having it sit in your bank account.

I always try to stay one percentage above where I’m supposed to be. Granted, my employer automatically bumps it up after each year of service.

I’ll admit, I was previously very conservative with the amount of money I put into my company’s stock plan or where I allocated my 401K dollars.

But, I’ve changed my ways because there’s no better time to start saving than the present, because, I don’t know about you, but there’s a few continents that I’ve never explored and I have lofty retirement goals.

Here’s what you do first - stop investing in mutual funds.

Seriously, you’re throwing money away. Mutual funds have hidden fees and you think it’s all grand when you see you have $100K, but what if you knew that $100K actually could have been $130K. You’re kicking yourself.

Instead, if you’re young, you should be investing aggressively. The more you invest now, the less catch up you have to play later on in life.

You can start by moving all of that 35-to-go fund into a S&P!

(What does that even mean?!)

96% of mutual funds don’t out perform the S&P - and, you’re not paying fees.

A S&P Index essentially is mirroring how the economy is performing. It takes the Fortune 500 companies performance and bundles it into one. You’re essentially purchasing tiny shares of stock for rockstar US businesses like Apple or McDonald’s.

It’s representative of a benchmark, it’s updated quarterly and it’s companies on the publically traded stock Exchange.

But, I know what you’re thinking, what if the next big tech company is a total dud or there’s a recession?!

That’s when you invest MORE. Because, it’s cheaper and you’ll be way ahead of the game when it picks back up.

Life is about making calculated risks, so get aggressive with your finances now!

And if you’re not putting in the most your employer will match, you’re leaving money on the table.

However, don’t do all of this and just put it on autopilot. If you set it and forget it, things are going to change like a whirlwind. I recommend reviewing the stocks you invest in daily. Apple has a stock app on its phone for a reason! Or, there’s plenty of resources online where you can have them emailed to you every morning over your first cup of coffee. Also, review your investments quarterly to see where you stand, and make adjustments.

This is super important. I rearranged all of my adjustments two quarters ago, but last quarter, I realized I left funds in the old account. I immediately got online and did the old switch-a-roo. Can you guess where I moved it? Bingo: S&P.

Are you paying attention to your 401K?

What stocks are you currently watching?

*Disclaimer, this stuff does not come overnight. This comes from wanting to learn more about it and having a super helpful boyfriend who is passionate about the subject matter and willing to sit down and answer my questions. It’s super confusing, but I’m more than happy to help!

sarah adellComment