The first priority as you take your hard earned money and try to save some of it is the 401(k) where your employer matches your contribution. This is money set aside for future years. Retirement! It is a marathon, not a sprint.
First, most companies do not offer individual stocks or bonds for your company deferred accounts. They make available a menu of mutual funds each with a different objective. They normally will not recommend how you invest your money because if your investments perform poorly they don't want to be sued.
Second, diversify, diversify, diversify. People at Enron in Houston put their money in the company stock and did not diversify. People that had seen their accounts soar to $1 million ended up getting $5,000 dollars. If a company offers their stock as an investment, don't put more than 5-10% of your 401(k) dollars into it. Mutual funds by their nature are diversified. For example, a large cap (company) mutual fund usually has 80-100 companies in their fund. You are automatically diversified.
Third remember that you are in a deferred account with the 401(k). If someone tries to offer you a product such as a deferred annuity within the 401(k), that is just plain stupid. Why place deferred investments inside a program that is already deferred from taxes. Don't laugh, it happens all the time.
Fourth, the mutual funds you are offered are usually "no-load". That means no cost to get in, no cost to get out. Funds like Vanguard and Fidelity are no-load and have a broad selection of choices. You can choose money market funds, big-cap, mid-cap, small cap, foreign stock funds, fixed investment funds, bond funds and then a variety of specialization funds like healthcare, energy, and resources. What shall we do? What shall we do?
The financial guru's want you to believe that you must place money in stocks to realize big gains over 25-30 years. That means they want you in 80% stock when you are young. Bullshit. People that analyze investments have found that if you buy just stocks over that period of time, you'd get a return of 11.7%. If you put you money 50% into stocks and 50% into bonds (fixed instruments), you'd realize 11.3% over the same period. So by doing a 50-50 mix, your risk is significantly lower and you get almost the same return.
Over the long pull, money market funds are just cash earning meager interest. Don't let your money sit in money funds. Transfer money funds to investments.
Each company will provide you with the portfolio of mutual fund investment choices. Some have 6-7 choices. Some have 50-100 choices. Pick a blend of mutual funds that include some big-cap that are stable steady growth, some mid-cap which are more volitile but mirror large cap over the long pull and small cap which can experience bigger fluctuations in the short-run but potentially bigger long range returns. Include foreign equities and then some fixed investment and bond funds. If you feel like you have insights about the future, put a few bucks into your preference such as health care.
I personally like healthcare. People are living longer. We give them more pills and treat them medically more often. But if you think bigger, healthcare includes companies that have experimented with the human genome. Each person has a particular DNA which consists of a string of 1 billion genes that make up your person. They will be able to alter the gene that makes you an air-head for a fee and eventually we'll all be equals. Getting past my sarcasm, I think the advances in healthcare are going to be tremendous in the next 25-30 and there are some companies that are going to "explode" upward like tech stocks in the 90's. Just don't ask me which ones. I don't know. So if you want to put 5-10% of your portfolio into a healthcare mutual fund, it is your choice to take the risk.
You will want your 401(k) to do well. You will want money available when you retire. If you don't take care of yourself, who will?
Chose wisely!
Love
Dad