Got 401k Glass_Floor_of_the_CN_Tower 2As world stock markets go down and up wildly, the average 401k investor would be wise to reassess where they are investing their money. The average employee cannot look at their 401k in the same way that a professional money manager views investments. Read the investment objective for any of the investment options available in your company’s 401k. It does not mention your name or personal retirement goals anywhere. It is up to the individual to match their personal goals with the objectives of investment managers of the investment options available in their 401k.

It may be uncomfortable to look at your 401k value when the investment markets are down, however avoiding reality does not make it go away. This is a good time to learn what you are willing to tolerate. 401k investors may be in one of three situations. First, they may be nearing retirement or a time to use 401k money like for college tuition. Alternatively, it may have been a long time since their investment allocation has been adjusted. A 50% stock and 50% bond allocation made five years ago may be predominantly stock weighted now increasing the risk a great deal. Or there may be no direction. Too often I have seen 401k investors put their money into an investment option just because it is there.

Take a look at the following chart in the link. This is the Callan Periodic Table of Investment Returns. This table charts different investment markets year by year. If you follow the Standard and Poors 500, you will see that it was not the best performing market every year. The S&P 500 is an index of the five hundred largest publically traded companies in the United States. The bulk of information in the media about the S&P 500 is how well it has done over many years. Look at what happened if an investor had decided to begin investing in the S&P 500 in 2000? That market began an almost two-year decline. It was a long time before money invested in 2000 made back its losses. Is 2015 the beginning of what happened in 2000? No one knows, however investing in just one market exposes an investor to much more risk than allocating money to different categories of investments. By spreading 401k investments among different investment categories, investors can adjust their 401k investments to fit their personal financial goals.

If you are wondering where to start, begin by figuring out how much risk you want to tolerate. Then choose an allocation that fits your personal investment goals and risk tolerance. Here is a link to a free asset allocation calculator that can get you started no matter what company manages your 401k: