The New Commonsense Guide to Your 401(k): Rebuilding Your Portfolio From The Bottom up

Part IV. INVESTING

Saving for Retirement

For many Americans, a 401(k) plan is the first brush with the investment world. More than 68 percent of households that purchased their first mutual fund in 2000 or later bought that fund through an employer-sponsored plan, according to the Investment Company Institute, the trade group for mutual funds. How can you make choices about investments that will play such a large role in determining your financial future?

The American worker used to retire with a pension, a social security check, personal savings, and the equity in his home. Today, everyone must invest. You must invest if you are to reach for your dreams, if you are to have the life you want. With a 401(k) plan, you can start small, make regular systematic investments and get lots of information from your employer about the investment options in your plan.

Successful investing requires a plan and a strategy. Your initial plan might be just to tuck the money away in a guaranteed investment in your plan. Learn about the basics. Be disciplined. When you develop your plan, stick with it through thick and thin. Don't get sidetracked by the "hot funds" or the "hot stocks."

But what about the market crash of 2008? Total U.S. retirement market assets, including both defined contribution and defined benefit plans, tumbled 24 percent to $7.86 trillion in 2008, down from $10.3 trillion the previous year, according to a report by Spectrem Group, a research and consulting firm based in Chicago. ...