The theme for this week is how to pick the right funds in your 401k plan. Yesterday, I talked about why the vast majority of you should probably just go with the target date fund in your 401k, if that’s offered to you.

But today, I want to talk about when you may want to shun the target date fund option and customize your 401k investment strategy instead. So here are 3 scenarios when you may want to custom design your 401k strategy:

1. You have an advisor to help you customize your 401k. If you have other investments, your financial advisor can often help you pick funds in your 401k that will be in harmony with your entire investment portfolio. This can be incredibly valuable in creating a cohesive strategy for your retirement. The advisor often has access to research tools that can help you pick the best options in your plan, and the 401k can be included in your annual planning meeting with your advisor, so you can monitor and make decisions together.
2. You actually like picking investments. If you’re in the 3% of the population that is confident, knowledgeable, experienced, and actually enjoys investment research, then by all means construct your own investment portfolio in your 401k.
3. You want more control over your investments. In a target date fund, you have no control over the holdings of that fund, when it’s rebalanced, or the trajectory of risk (in other words, how much is in stocks and bonds at any given point along your journey to retirement). If you’re a control freak like me, you may want to consider customizing your investment strategy so you can have a say-so in what you own and how often your portfolio is rebalanced.

That’s it for today! Thanks for listening.

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

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