Cash The Checks

Personal Finance Blog With Advice On Making Money And Saving Money

Jul 16 2013 Investing by Edwin C 1 comment

boost-your-401k

Your 401K or other retirement savings plan is your path to a bright future and retirement. Putting money in it and watching it grow can be hard when the economy is slow and returns are small or non-existent. Instead of crossing your fingers as you ride out the rough economy, why not change your 401K to make it work harder for you?

The key is to pick equity assets that have very little risk. It’s important to take your age and retirement goals into account before making changes to your plan to ensure that the risk is acceptable and in-line with your retirement goals. Read on to discover 5 ways that you can boost your 401K and make it work harder for you.

1. Invest in the Standard and Poor’s 500 index

This index is composed of the largest companies in the world. Many investors consider this index the mark to beat and most retirement planners agree that the Standard and Poor’s 500 index should be a part of your investment portfolio. Between 1963 and last year, the index averaged a return of 9.8% each year. That number is what a good investment should beat.

2. Invest in U.S. large-cap stocks

These are the stocks that are currently getting no love from investors. They are being neglected and left on the shelf to collect dust, which makes them a great bargain for hungry stock-hunters like yourself. From 1963 to the present, large-cap stocks returned an average of 10.9%.

3. Invest in U.S. small-cap stocks

These companies are small and may just be starting out. They usually have the potential to grow faster than bigger companies and as a bonus, their stocks are much more affordable. Just think, had you gotten in on Microsoft, Walmart or Google before they made it big, you’d be retiring comfortably. Average returns on small cap-stocks is 12.4%

4. Invest in real estate through REITs

Buying physical real estate is risky business, but REITs are a smart deal. The investment trusts function like mutual funds with a few twists. They aren’t ideal for taxed accounts, but they do well in 401K’s and IRA’s. The average return on REITs has been around 12.5% despite the economy.

5. Check out emerging market stocks

Emerging market stocks are probably some of the riskiest investments, but they have explosive growth potential. As long as this is just a small part of your portfolio you can minimize the risk while giving yourself a little piece of the prize if your picks blossom overnight. From 1988 to present emerging market stocks averaged a return of 12.9%.

Comments

zimmy@moneyandpotatoes.com on 07/20/13

You could also find some good returns by checking out emerging markets in the bond funds as well. It might not be as liquid as an ETF but flip side is the risk might be spread out over a much larger amount of risky bonds.



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