RETIREMENT PLANNING » IRA & ROTH ACCOUNTS

The goal of investing is to use money to make more money. Whether that strategy is going to be implemented in stocks, bonds or 401k plans, there are ways to increase your odds of gaining returns. When it comes to a 401k, there are some simple steps you can take to help raise your chances of experiencing higher gains.

Steps to a Better 401k

1. Higher Investment ReturnsThe absolute best way to increase your 401k returns is to ensure that you sign up for the benefit with your employer. In the long run, you will be able to build tax-deferred rate gains and can even lower the amount of income taxes you pay. Additionally, many employers offer matching contributions to some degree, giving you an additional amount of cash on top of your already negotiated salary. Make sure to take the maximum contribution your employer will match to ensure the greatest return.
2. Diversify InvestmentsMake sure that your 401k investments are diversified to include some higher yielding investments. By playing it safe with your 401k, you risk the chance of not keeping pace with the average inflation rate of 3% and not allowing your money to earn the most it possibly can. If you are taking high risks in your 401k, make sure to diversify your holdings with some safer cash-based investments elsewhere just to balance the overall strategy.
3. Asset AllocationWithin your asset allocation, make sure that no one fund holds more than 5% of your total portfolio. By constantly going into your 401k plan and redistributing the assets, you will be preventing putting too many eggs in one basket and increase your odds of greater returns.

If your company offers stock options as a benefit there is no need to purchase more stock through your 401k. Use those additional funds to find other types of investment options as a way to maximize your investment yields.

When the economy starts to dive and the prices of securities and other assets start to fall, investors need to be proactive in implementing investment strategies in order to insulate themselves from a true bear market. One investment instrument that you should pay special attention to is your 401k. Here are some steps to recession-proof those investments:

1. Find safe investment harbors. Those who are prudent in their savings strategies may want to seize this moment to invest in bonds. Federally issued bonds are low-risk, guarantee a rate of return and are considered one of the most simple ways to diversify an investment portfolio. The yield rate for savings bonds is just enough to hedge out the average inflation rate of 3%. What you will be giving up as far as a high yield will be more than made up for with peace of mind.
2. Buy more shares. One great thing about the market decline is that some choice stocks are now more affordable to the average investor, and that includes dividend stocks. Dividend stocks are like traditional stocks, but with the added boost of yields that can be physically distributed to investors when they occur. Because the prices of those instruments are fairly low, recessions are a good time invest so when the market does improve, you will be able to get a little more cash on the side.
3. Buy inverse ETFs and other commodities. Investors may also be able to recession-proof their 401k plans by investing into funds that actually thrive in bear market conditions. Some of the funds are compromised of gold (which tends to increase in value as the dollar declines) and derivatives to short the S&P 500 Index. Strengthen your 401k even further by investing in leveraged inverse funds as they are constructed to profit from a market decline (based on the value of its chosen underlying benchmark).

In hard times, it is important to do something to strengthen your 401k investments, as in the end, your investments are not really meant to manage themselves.

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