It is not an easy task to choose a mutual fund in 401k; it
is like selecting a fund outside of one. 401k plan is a tax deferred plan, so
there is no worry about taxes on dividends or capital gains distributions. It
also depends on your age.
Instruction for 401k fund selection.
11)
First of all review your 401k plan summary; it
will help you to let you know the plan features, like 401k matching contributions
and contribution limits.
22)
Understand the investment vehicles available for
your 401k plans. It should required to offer at least three options:
a)
Stable Value Funds
b)
Fixed Income/ bond funds
c)
Stocks funds for long term
33)
Read carefully the risk tolerance and time
horizons of your 401k plan.
44)
Understand the relation of volatility and
returns of your fund.
55)
Identify, which funds is most suitable for you
and can meet your objectives.
66)
Learn how the fund manager select investment
option for your fund, what are the fund operating expenses, how those selection
can impact the performance of the return and whether there are any restriction
or not.
