401(k)
Advantages... Page 2
continued
Access to the Stock
and Bond Markets
Stock and bond mutual funds are frequently among the investment options offered by 401(k)
plans. A mutual fund is money pooled from many investors. Experts called fund managers
invest that money in stocks, bonds and other assets with a view to achieving a certain
amount of return (the fund's "objective").
Mutual funds allow investors who may not otherwise have sufficient assets or expertise to
"play" directly in the stock and bond markets -- and to reap the potential
benefits of those markets.
Professional Management
When you participate in a 401(k) plan, professionals work for you. Your plan administrator
(the company in charge of administering your plan) provides you with periodic account
statements that let you know how your investments have performed. If you want to change
your contribution amount or how your money is invested, you simply notify your plan
administrator.
What's more, if you invest in mutual funds through your 401(k), you also benefit from the
expertise of the fund's management team. It's up to the fund managers to decide when to
buy or sell securities and to keep the fund on track toward meeting its objective.
Ease and Convenience
401(k) providers work hard to make your investment experience a pleasant one. Potential
investors sometimes worry that they won't be able to keep track of their 401(k)
contributions and won't know how their money is invested. Nothing could be further from
the truth. Once you make your contribution and investment decisions, your 401(k) account
is meticulously managed and you are kept up to date through periodic reports.
Next: The Drawbacks |
