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[topic 1]
One reason to strongly consider 401k Easy Online for your company 401k plan is the tremendous array of investments your plan will be privy to. It's no secret that appealing investments inspire initial as well as ongoing 401k participation. They're arguably THE most important determinant to your 401k plan's health and success. (You'll already have nailed down convenience, accessibility, etc., with 401k Easy Online's user-friendly architecture.)
Of course, investments one employee finds appealing may not interest another; they may not even interest the first employee five, ten years from now. So how do you select investments for your company 401k plan? 401k Easy Online gives you access to more than 500 mutual fund families representing more than 10,000 different mutual fund portfolios, plus access to self-directed brokerage accounts. Do you offer all the options? Not likely, unless your employees have a tremendous amount of time on their hands to read through 10,000-plus prospectuses. So how then do you sufficiently narrow the field without over-restricting it?
We've drawn up four basic steps to help you select your 401k plan investments (and to help you cover your bases regarding pertinent government directives). The below have been written in terms of mutual funds, but the content can easily be extrapolated to choosing self-directed brokerage accounts. And remember…
-- Your goal is to derive an investment lineup that will fit the needs and financial objectives of your company's employees.
-- There is no single "best" lineup of investments.
-- Your choices are not set in concrete. 401k Easy Online lets you add and/or remove investments from your plan if and when the need arises.
-- We're always here to help. We derive no financial benefit or incentive from recommending any mutual fund or brokerage company; you can be assured that our input has only your plan's health and appeal in mind.
-- We follow our own advice, meaning our investment recommendations will always focus on quality fund providers offering a wide spectrum of suitable investments, ones that span the range from the ultra-safe, low-risk,
conservative investments to the highly volatile, high-risk, high-potential-return investments; such can satisfy a wide range of investors, ones with varying personal needs, investment objectives and investing experience.
-- 401k Easy Online contains an extensive catalogue of easy to understand literature to help your employees make educated investment decisions. We recommend that you, as an employer, refrain from dispensing investment advice. Instead, simply direct your employees to the quality materials contained within 401k Easy Online.
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[topic 2]
The most common -- and detrimental -- mistake made in choosing plan (and personal) investments is to base a decision on an investment's performance history, particularly its recent performance history. Investment performance is cyclical: a mutual fund that's blazing hot today may be as cold as ice tomorrow, and vice versa. Past performance is no guarantee of future results. It should be considered as only one indicator of an investment's suitability.
A better approach is to let your objective be your primary guiding light. For choosing your company's 401k plan investments, your objective is to select a spectrum of investments that will prove appealing and satisfying to your employees' diverse investment needs. The spectrum, not fund-by-fund performance, is your quarry.
To achieve a suitable spectrum of investment options, select one, two or three mutual fund families, then choose a cross-section of funds from within each family. Mutual fund companies compete for investment dollars by trying to out-perform each other. Your employees can benefit from this competition with access to even a single reputable fund family; access to a second or third family grants added choice and flexibility. By listing a cross-section of investments within each family group, your employees will be able to find investments that suit their investing temperaments and needs, now and down the road.
At minimum, your plan needs to offer investments geared toward the following:
-- Preservation of Principal
Money market funds are the default choice for "safe" investments. Remember, though, that they are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
-- Income
For a steady stream of income, your plan will need funds that invest in bonds. Like stocks, bonds experience fluctuating share prices, though generally to a lesser degree.
-- Income and Growth
Balanced funds, also known as "lifestyle funds," invest in combinations of stocks and bonds. Balanced funds that hold a greater percentage of stocks over bonds are more volatile and potentially more profitable. Those that hold a greater percentage of bonds over stocks, on the other hand, are more stable but less likely to return big investment gains.
-- Growth
Stock funds (domestic or foreign) offer the greatest potential for long-term gain, but they also come with the highest risk: they're more volatile and have the greatest potential for posting investment losses.
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