I was shopping at Target yesterday. As confused as I always am when I shop, I took a detour through the kid’s videos aisle.
To my amazement, I saw the same video that I bought for my kids years and years ago. That video was the Disney classic “Snow White and the Seven Dwarfs.”
The number seven got stuck in my head. I suddenly remembered that seven is the same number of asset class mutual funds found in most Minnesota company 401(k) retirement plan accounts.
The three main company 401(k) mutual fund asset classes are stocks, bonds, and money market. The remaining four company 401(k) asset classes are combinations of the three main asset classes.
Here is a quick list of the seven main mutual funds asset classes that make up your company 401(k) retirement plan account.
A Growth fund is a stock mutual fund that invests in rapidly growing companies. These companies are believed to be growing their earnings at a faster rate than the overall U.S. economy.
A Value fund is a stock mutual fund that holds stocks that are thought to be undervalued in price. The company stocks also pay quarterly dividends that pay a higher rate of return than money market investments.
A Blend fund is a stock mutual fund that is made up of both growth and value stocks.
A Balanced fund is a mutual fund that combines stocks, bonds, and money market investments together in one mutual fund.
An Index fund is a mutual fund that provides the investment return of a single U.S. stock market benchmark index. The most common index mutual fund found in company 401(k) retirement plans replicates the Standard & Poor’s 500 stock index.
A Bond fund invests primarily in debt instruments like government, corporate, and convertible bonds. Some bond mutual funds invest in mortgage-backed securities.
An International mutual fund invests in companies or government securities located outside of the U.S.
The best way to figure out the best combinations of these mutual funds for your company 401(k) retirement plan account is to log in to your company 401(k) retirement plan web site. Find the page that provides the most recent copy of the fund prospectuses.
This sounds like too much work for most individual investors. Give some thought to asking your current investment advisor to provide you a road map of the best way to invest your company 401(k) retirement plan account.
Ric Lager
Lager & Company, Inc.
