I have to make a choice of contribution to my 401K. I'm very confused about the choices. They are Money Market fund, fixed income fund, general fund, large cap equity fund, small/mid cap equity fund, index fund, international fund, and global tactical asset allocation fund. Those are offered by the company. Can someone give me some recommendations on what those funds are and which one has hight risk or low risk? Thanks you very much.These are listed in order of risk from low to high.
A money market fund invests in short term commercial paper. They are managed to keep a steady net asset value of $1 per share (although that's not guaranteed). It carries the least amount of risk but provides the lowest long term potential return.
A fixed income fund invests in bonds. You'll have to check the fund prospectus to find out what types of bonds. This is also relatively safe and has relatively low long term potential returns.
A large cap equity fund invests in large cap stocks (that is, very large companies). The index fund probably refers to the S&P 500 index. Check your prospectus to be sure. If so, this is also a large cap stock fund except that it tracks companies in the S&P 500 index rather than relying on a manager to select the investments.
A small/mid cap equity fund invests in the stocks of smaller companies.
International and global funds invests in the stocks of companies on other countries. Global funds could also own some US stocks.
I have no idea what you mean by a "general fund". I've been investing for 20+ years and have never heard of this.
Risk is proportional to potential return. You don't have to take extreme risks to do well, but not taking enough risk means that you won't earn much in the long run. One possibility is to diversify risk by spreading your money over multiple choices. An example would be to put some into the large cap or index fund, some into the small/midcap fund, and some into the international fund.Go to your plan administrator and make them give you the prospectuses for each of your choices. All funds are different and perform differently even if they're in the same category. Also look at the fees for each fund too.
You can also research the funds on-line when you know the symbols and names at places such as Vanguard and Morningstar, perhaps MSN too.Go to your HR department & ask for the number to the plan administrator. They are there to help you make those kinds of choices. No one on Yahoo! can tell you what is best for you without asking the important questions that they need to have in order to make recomendations for you.
The adminstrator should at least have a questionaire that you fill out & will help you make allocation choices.You fund manager will have all the answers for you, as a general rule though I'll guess at risk levels starting with the most high risk.
1) Small/mid-cap
2) Index
3) International
4) Global Tactical
5) Large Cap
6) General
7) Money Market
8) Fixed Income
The younger you are the more risky (aggresive) you want to be, the older you are the more conservative you want to be.If your plan offers a target retirement date fund, that might be the best thing for you until you learn more about investing.