Step-by-step approach to effectively handle your 401k investments and select your funds

From ArticleWorld

The key to manage your 401k is to choose funds that you won’t end up trading more than you would need to. What you want to do is shift your money inside of your 401k as the market shifts in various directions. Here are some pointers to help get you started.

In the beginning

• In the beginning make sure to look over your 401k website information, they all pretty much offer one. Once at the website find out which funds are available to you. To help you to do this look for the ticker symbol which stands for each option. To find out more about the fund, if there is not ticker symbol, read the information that is available.
• There are web sites that have stock charts. One is Prophet.net, to get the information that you need type in your fund symbols. Also, Prophet.net allows you to type in more than one symbol. This is also true of other sites.
• To get the information that you need about your fund you will need to type in a fund, then type in the major indexes. For example, $RUT (Russell 2000 small cap), $MID (mid cap), $SPX (SP500), $COMPQ (Nasdaq), and EFA to compare with foreign funds.
• Next, you need to pick one or two of the funds that track the $RUT, the same for $MID, EFA, and Nasdaq. Know that foreign funds are much more easy to spot because of their names.
• You will need to choose about 3 to 6 funds of each kind.
• If possible try to have a routine where you are checking the indexes daily, maybe on your lunch break or before bedtime. You need to do this because if you are going to move your money around, and you will occasionally, then checking your indexes on a regular basis will tell you when it is time to move them.
• Know that every 401k have different options. For example, your could decide on a Money Market fund, or a “Stable Value” fund which does not invest in stocks and by and large does not go down. The fact that they don’t go down is one of the advantages even though they only offer small returns.
• You can select to have most or all of your investments fall into a stable money option when the market is by and large is going down.

You will need to understand how to move your money from fund to fund. If you look over your 401k site it will teach you how to do this.

• Make sure to pay attention to the market, you will need to know if it is going up, sideways, or down. There are some basic signs that will help you to detect this. One of the most simplest ways is with looking at the moving average which most web charting sites have. If it is funds and longer term investments that you your are trying to decode look to the 63 day moving average which is 1 quarter. Or look to the 250 day moving average (1 year). If you opt to use the 63 days it will mean a couple of more trades. However, remember that over a period of 20 years you can gross more over the 20 day average.
• If your funds and indexes have some type of symbols watch them. Here is how it works: when price is over the average choose to be in the Funds in your 401k, under average choose to be in the Money Market or stable value option that won’t lose you money. When your indexes and funds move below the average, shift your investments.
• Also, pick the 63 days and 250 days for those long-term investments that you are going to use for your retirement account because they are good indicators for all three. However, use the simple and exponential for moving averages because it will be more effective like the Moving Average Convergence/Divergence (MACD) and the Stochastic. Prophet. net is one site that will allow you to use the 250 and 63 day times for the Stochastic indicator.
• Try to understand all you can about these three indicators, and don’t worry yourself about others that have not been spoken of in this article. There is plenty of information about these three indicators. Also, remember that if all three of these indicators are saying there is a change in your markets direction, the odds are they are correct. One problem, you might have a hard time figuring out when to use them. But a quick note, for 401k and longer term, use 63 and 250 days.
• Don’t hesitate, just do it. A lot of people have lost their retirement funds due to many things. For example, 70-80% of people lost their retirement when the Technological market took a dive in 2000 and the not to mention the problems that sadly resulted with the tragedy of 9/11. If only they could have been looking at the 63 day (quarterly) average, MACD, and Stochastic their investments may have been saved.

Do’s

• Do try to have fun, your investments will always fall into two categories: the good and bad. So, why not loosen up.
• Do protect your investments as much as possible when the market is not doing well, and do not trade your 401k funds. The three indicators will tell you when to move your money.
• Do remember about moving averages. If a price falls under 250 and averages in the top part of the chart, then move your money into a better and safer option, then wait until the price goes up again.
• Do notice the Histogram which is two moving lines that shows the difference and is zero when crossed. When it is under zero put your money in the stock funds, below zero use the safe option, meaning be out of the stock funds.
• Do remember the Stochastic which is when the dark line traces the price of stock/fund. As previously, when it goes below the red line be out of stocks, above the line be in them. If you use this one singularly, it could help you shave a few extra percents off your profits. Be warned that it is not always dependable when it is near extremes.

Don’t

• Don’t be frighten, when the price is under average you can choose to get out. Don’t get used to leaning information exclusively from one source. Use the internet to search for more information.
• Don’t always take the first easy answer that you are offered. It is hard to know when a turn is real or not, the truth is you can have your money in one place for a long period of time without any change.
• Don’t think that this whole process will be easy, it won’t but there is plenty to learn in plenty of time.

The steps given in this article is part of a system known as technical analysis, but there are others types of financial analysis.