How to Invest in a 401k: A Financial Advisor’s Guide

One of the most common questions I get is how to invest in a 401k. This is not an easy question to answer without proper information. For instance, every 401k has different options for investments, so I need to see the 401k itself to know what options you have. Another important factor is your risk tolerance. How much risk are you willing and able to take with your investments? I personally invest in risky mutual funds because they often perform well over the long run, but they also have big fluctuations. For example, I was down 35% at one point in 2022. I can handle that risk because I believe it will pay off in the future, and I am not very emotional about money. However, not everyone is like me. Some people get very anxious and lose sleep when they see a 5% drop in their portfolio. These people should not invest in the same funds as I do. They should choose more conservative funds that are less volatile. That’s okay too. So when someone asks me how to invest their 401k, I have to make recommendations based on their situation and preferences, not mine. Sometimes that requires asking a few more questions than they might expect, or having them fill out a questionnaire to help me understand their goals and risk profile. But I love helping people with their 401k investments. I want them to be happy with their growth and with me, so that one day when they retire or change jobs, they come back to me for help with rolling their 401k into an IRA. I also get paid based on the amount of assets I manage, so the more your 401k grows, the more I benefit too. It’s a win-win situation. If you are curious about what a free complimentary 401k review looks like, feel free to book a time with me using the link below.