How to Manage Your 401k Investments and Choose Your Funds Colorado

Steps

1. Explore your 401k web site (almost all offer one now) and learn the funds that are available to you. Find the ticker symbol that represents each option, if one is available. If there is no ticker symbol, then read the information to find out what index the fund may compare itself to.
2. Visit an established web site that offers stock charts, like Prophet.net, and enter your fund symbols. Prophet.net and other sites allow you to enter more than one symbol to compare them. Enter a fund, and then enter the major indexes, $RUT (Russell 2000 small cap), $MID (mid cap), $SPX(SP500), $COMPQ (Nasdaq), and use symbol EFA to compare with foreign funds.
3. Once you have discovered which index your fund tends to follow (it will be obvious on the charts) then pick one or two funds that follow the $RUT, one or two that follow the $MID, one or two that follow the EFA (foreign funds are usually easy to spot by their names), and finally one or two that follow the Nasdaq. Choose 3 - 6 funds, and at least one from each type.
4. Get in the habit of checking the indexes on a daily basis, or at least a couple of times a week, at about lunch time. While you will generally not move money around too often, when it is time you need to know, so you have to be aware of the indexes on a regular basis.
5. Know your options. In every 401k, there is an option for a Money Market fund, a 'Stable Value' fund, that does not invest in stocks, and generally never goes down. These funds return small amounts, but the advantage is that they don't go down! Within your 401k, you can take advantage of this by moving all of your investment into the stable money option when the market in general is in a down turn.
6. Explore your 401k site to learn how to move your money from fund to fund. Some are very straight forward, other sites are a little difficult. Once you know how, you'll have no problem.
7. Watch whether the market is going up, or going down, or worse... sideways. The most basic, simple indicators around is the simple moving average that almost every web charting site can do. For funds and longer term investments, you should choose to use either the 63 day moving average (1 quarter) or the 250 day moving average (1 year). Using 63 days will mean a few more trades, but over 20 years can earn much more over the 250 day average.
8. Watch the indexes, and watch your funds if they have symbols. While the price is over the average you choose to use, be in the Funds in your 401k. When the price is below the average you use, be in the Money Market, or stable value option that does not lose money! Move your investments to the stable option as soon as the indexes and funds move below the average you use.
9. Be aware of other helpful indicators. With long-term investments like retirement accounts, use the 63 days and 250 days for all three very effective indicators, the moving average (use both Simple and Exponential at the same time for better effect); the MACD or Moving Average Convergence/Divergence; and the Stochastic. Prophet.net is one site that lets you put in the 250 and 63 day times for the Stochastic indicator.
10. Don't worry about other indicators that haven't been mentioned here; learn what you can about the Simple and Exponential Moving Averages, MACD, and Stochastic. When all three of these indicators agree about a change in direction, you can bet heavily that the change is really happening. Information about these three indicators are everywhere, but the one piece left out or never mentioned is the best time frame to use. For 401k and longer term, use 63 and 250 days.
11. Do it. Do it. Do it. Many people lost 70-80% of their retirement between the Tech market dive in 2000 and the difficulties with 9/11. Anyone watching the 63 day (quarterly) average, MACD, and Stochastic would have saved almost all of their investments by getting out when all three indicators agreed!

Tips

• Have fun. There are two measures of success while you're waiting for the retirement... how well you do during the good times, and how little you lose in the bad. It's fun to tell your co-workers that you have made 1.5% in the last 3 months... when they and the whole market have lost 15%!!
• Were you invested in the year 2000? Did your 401k soar, or sink into the abyss with most everyone elses. The idea is not to 'Trade' your funds in your 401k. The idea is to protect your investment when the market turns south. The 63 and 250 day time frames with moving averages, MACD, and Stochastic will tell you when to protect your money and move it to the stable option.
• Moving Averages: bottom line, if the price is below the 250 averages in the top part of the chart, then get your money into the safe option until the price goes above again.
• MACD: On this section, notice the two lines that look like averages. Then, notice the other scale that moves a little below and above the zero line (the Histogram). This shows the difference between the two moving lines and is zero when they cross. When the histogram is above zero, have your money in the stock funds. Below zero, think about being out of stock funds and into the safe option.
• The Stochastic: The dark line follows the price of the stock/fund. When it is above the red line, be in stocks, when it falls below the red line, think about being out. Using this one exclusively can often help keep an extra few percent of your profits, but when near the extremes, it's not as dependable and needs the others.
• You should always keep contributing to your 401k account in some form. After all this is your money that you will need to live on when you retire, and every dollar you contribute lowers your overall taxable income.

Warnings

• Do not get excited about short term moves. Don't 'Day Trade' or trade for the short term. But never be afraid to get out when the price moves below the average you choose. Putting money into an investment is fairly easy... selling, or getting out is the hardest thing you'll ever do. Get over it, do it any way. Get out when the three indicators agree that the market is going down, get back in when the market turns and starts going up.
• Don't take opinions/information from just one source. Search the web for MACD and for Stochastic, and you can find information from dozens of sites. They all leave out the most important part... using the right time periods, but now you know they are 63 days and 250 days.
• Don't think there's something better. Knowing when a turn is real, or just a fake out, is DIFFICULT. Everyone wants to sell you an easy answer, but when it is all said and done, no one really knows. Sometimes, you'll get out, just to get back in again two weeks later. Sometimes you get in, then run for the hills (stable money market!) after just a few days. Most often, you will keep your money invested or not for months and months without any change.
• Don't be scared. Everything is easy once you know how, and the nice thing about 401k investing is that generally there is plenty of time to learn how.
• The advice given here is part of a broader investment system known as technical analysis which assumes the current price of a security reflects all current information widely known about the security. There are other methods of analysis that can also prove helpful over time.
• One flaw that is "baked in" to many 401k plans is a recent change. Many plans prohibit the amount, or restrict the number of changes you can make in your account.

Sources and Citations

• http://mutualfunds.about.com
• http://www.mullooly.net/my-401k-should-i-keep-contributing/731

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