The theme for this week is how to pick the right investments in your 401k plan. Regardless of whether or not you go with the autopilot target date fund option in your 401k or customize your investment strategy, it’s a good idea to do a little homework on the fund or funds you select for your 401k.

Today, I’m going to share with you how to go about doing that, so you don’t make the common mistake of picking the fund that have the best performance. As I talked about on Thursday of this week, that’s a terrible idea. You can drive just by looking through your rear-view mirror. The same is true for investing. You can’t just look to the past returns to find the best investments.

In my opinion, the best, objective online resource for mutual funds and ETFs is Morningstar. So here’s how you can use Morningstar to research funds in your 401k.

Find the ticker symbol for the fund that you want to research. This is a 5 letter symbol that’s like a social security number for funds. It’s important that you research with fund symbols and not the name of a fund, since most mutual funds can have 5 or more different share classes for a given fund, so you want to be researching the right fund, which means you need that 5 letter ticker symbol.

Type that 5 letter ticker symbol into google. Usually the 2nd or 3rd result is morningstar - click on that and you can find a wealth of information about that fund for free. You’ll want to research performance over long periods of time vs. peers. Take a look at the fees, how long the manager has been with the fund, the % of stocks, bonds, and cash in the fund. If it’s a bond fund, do a little more digging to find out about the credit quality, and the duration of the bonds in the fund.

If this is all Greek to you, that’s okay. It just indicates that you may want to just go with the target-date option or have your financial advisor help you pick the right mix of funds in your plan.

Morningstar has a lot of information, which is great, but there is a little bit of a learning curve in finding what you’re looking for. But it’s worth it.  This is your retirement we’re talking about here, and a little research and knowledge about what you’re investing in will go a long way.

That’s it for today. Tomorrow, we’re going to recap the week and I’m going to give you a little preview of next week’s theme.

My name is Ashley Micciche and this is the One Minute Retirement Tip.

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, 401k, 401k plan, Roth 401k, 401k investing, 401k investment strategy, smart 401k investing, morningstar