401K investments

401 (k) investments are often looked upon by employees as their retirement cushion savings. As critical as the purpose of 401 (k) investments is, most individuals look upon the sign up and maintenance process for their plans as a routine chore that is taken over by professional investment managers once the paperwork has been completed.

The truth, however, is that in order to maximize retirement savings and achieve peace of mind during the golden years, individuals need to be more actively involved in the management of their 401 (k) investments. Most employers give you the option of customizing your plan and actively choose and distribute the asset allocation strategy.

These plans are highly customizable and depending on what your employer offers, you can select from some of the following (although more possibilities exist, we cover the important ones):

Mutual funds

Well, most of us know what mutual funds are. They are vehicles, wherein a large pool of money is created from investments by multiple investors. The advantages are that one gets to diversify (in fact some mutual funds attempt to achieve stock market-like diversification to emulate the performance of S&P 500 and such large indices). If your plan offers you the option of selecting these as one of your asset classes, consider selecting the top-performing ones with a proven track record. Mutual funds further allow you the option of allocating your investment through money market, growth, international, stocks, bonds, and more. Depending on your employer’s offering, you may be able to allocate your money to one or more these asset classes.

Fixed income funds

You can also allocate your 401 (k) investments to fixed income, which essentially guarantee a fixed interest rates as a result of backing from guaranteed interest contracts powered and underwritten by insurance companies. Traditionally, although there is some form of interest rate guarantee there is also an associated risk of getting stuck with lower interest rates and slower growth potential.


Corporate stocks, though potentially lucrative, present a very high degree of risk due to market forces and volatility. Depending on your age, proximity to retirement, and income you may want to balance the risk associated with these.


Bonds could be either corporate bonds or savings bonds issued by the US Department of Treasury. Although lower risk, these instruments offer fixed income rates. Savings bonds are considered relatively safe investments while corporate bonds are rated by independent rating agencies.

In addition to these traditional asset classes, your 401 (k) investments could also be allocated to a variety of additional sophisticated asset classes and investment options. Your fund manager can provide you additional information about these options. Remember, though, these plans are not backed by government guarantees or insurance.

Disclaimer: This article is not intended as investment advice. You must check with a qualified professional before making any investment decision.