Most People Have No Idea What's In Their 401K Plan
The 401K Plan that many Americans are depending on for retirement are under managed. Simply letting your hard earned money sit in a mutual fund or company stock may be losing you a great deal of money for your retirement years or putting you at undo risk.
Know What You Own-Understand what you own and its performance as well as its risk. Many funds hold assets that make it difficult for holders of the funds to know what's in them. If you can't understand it, you should find funds that you understand and agree with their philosophy. And most importantly, you should be able to measure it's performance on a quarterly basis.
Company Stock -No sweeter deal than getting stock given to you by your company. But regularly manage your holding in company stock so that it's weighting doesn't dominate your 401K. Remember Enron, MCI, Bear Stearns, and Lehman.
Why Bother To Understand Financial Markets ?
The understanding of financial markets is more important now than perhaps any time in industry. The new economy has shifted away from industrial workers to knowledge workers. The industrial worker in the 1900’s were 50 times more productive that the farmer and the knowledge worker is 10,000 times more productive than industrial workers according to Nathan Myhrvold, chief technology officer at Microsoft. This may seem far-fetched at first, but consider the market capitalization of Microsoft exceeds that of Ford, General Motors, and Daimler Chrysler combined by a factor of two. And the personal wealth (stock market) of Bill Gates is beyond computation.
Knowledge workers include, “financial market professionals”, programmers, technical writers, lawyers, scientist and teachers to name a few. It generally includes people that don’t directly produce “widgets”, but contribute to the commerce of information that results in the production of “widgets”. This writing will discuss among the most productive knowledge worker, which happens to be financial market professionals. I refer to financial market professionals in the broadest terms. My definition of “financial market professional” includes anyone that makes money directly or indirectly from the market.
Knowledge work like that of financial markets offers an extraordinary potential for financial rewards. Technology and the Internet have dramatically created opportunities in financial markets that are unparalleled in history. Today’s markets provide a quality and quantity of information that once was only available to Wall Street insiders. Technology has driven transaction and overhead cost down to the reach of the most modest trader allowing anyone with the knowledge and skill to make money.
What Happen To Retirement ?
We live in a time where a pension is no longer an expectation or a guarantee in retirement. American business has substituted pensions and health care benefits for retirees into a 401K Plan. This puts the burden on employees to manage their own pension fund via a 401K Plan. Most people allow there 401K to sit in mutual funds or company stock or some combination with little or no plan. Learning financial markets to secure a comfortable living and access to health care in retirement is more than reason enough to know what your doing in not only building your 401K for retirement but building wealth for the present. Have a retirement plan that realistically projects your financial requirements for retirement. This will help determine a reasonable risk profile that effectively protects your 401K plan from unnecessary risks. Get a professional to help you with a retirement plan now. The more time you plan before retirement the larger you can grow your 401K plan while best managing risk.