It's time to check your 401(k) plan – the investments might have more risk than you think


Olde Hornet

Well-Known Member
It's time to check your 401(k) plan – the investments might have more risk than you think


With the stock market flirting with record highs — and 30,000 in view for the Dow Jones Industrial Average — this is a good opportunity to check under the hood of your investment portfolio to see what you actually own.

If you have a 401(k) plan and haven't evaluated it in a while, now's the time to do that — because you might be less diversified than you think.

Many investors want broad diversification, as it helps to spread risk among hundreds if not thousands of stocks, bonds and other assets. Many have bought funds such as those pegged to the Standard & Poor's 500 index that hold slices of 500 stocks. That's normally good diversification, which helps to explain the popularity of S&P 500 index funds and their emergence in workplace 401(k)-type programs.

But there are times when diversification runs in reverse, especially as big, powerful stocks rise in value to take up bloated shares of these funds and drive an outsize amount of their investment performance. Such trends can be great while they last, but they invariably cool off.
 

Top