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Save through 401(k) Plans

Many employers offer a choice of 401(k) plans - usually a group of mutual funds, all run by one large company. Get to know as much as you can about mutual funds and investing. As you learn more, your strategy for allocating assets might change. Don't hesitate to change your monthly 401(k) allotment to a new mix of stocks, bonds and other investments to reflect your changing views.

1.
Read the 401(k) plan prospectuses and brochures provided by your employer.

2.
Note the annual returns, investment strategies and goals of each of the funds.

3.
Understand the differences among the various funds.

4.
Decide what your investment goals and priorities are.

5.
Get to know your own appetite for risk. An aggressive-growth stock fund will be riskier than a bond fund, although the stock fund is likely to provide greater long-term returns.

6.
Study different theories of asset allocation. Many investors use a life-cycle approach to investing, taking higher risk in their 20s and 30s, and backing off from risk in their 50s and 60s. (See Related Sites.)

7.
Divide your contributions among funds in a way that reflects your goals and your appetite for risk.

8.
Avoid putting all your money in one or two funds.

9.
Avoid putting all your money in stocks. Even if you're young and you aren't risk-averse, put at least 10 percent of your funds in bonds.

10.
Make sure you take full advantage of your employer's contribution to your retirement plan. It might be the easiest money you'll ever earn.