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Financial Planning / Foolish 401(k)s


Subject:  Re: 401K portfolio distribution Date:  9/26/2013  12:24 PM
Author:  Fuskie Number:  25147 of 26118

Actually, the Freedom funds are target date funds, with the year (2045) being the target date for retirement. At age 30, you are probably looking 35 years down the road towards retirement (around 65), so 35 years from now would be 2048. So either the Freedom 2050 or Freedom 2045 would be most appropriate. The way it works is that the blended fund is invested mostly in equities (stocks) today but as you age nearer towards your target date, the fund transitions increasingly from growth into income (more aggressive to more conservative).

This type of fund is great for newbie investors who want to be more aggressive with their retirement savings but don't have the time or interest in delving into the inner workings of a mutual fund. But the target funds tend to have high management expenses and since they are so new, not too many years of performance history. There maybe other index or managed mutual funds with better performance, lower expense ratios, higher dividend payouts, etc. As you learn more about what to look for in a mutual fund, you may decide that there are other options within the 401k that offer better potential returns for your retirement savings dollar.

Note that some 401k's let you purchase actual individual company stocks, but there may be steep transaction costs and by their nature, investing in individual companies is riskier than investing in mutual funds as the latter buys portions of many companies while with individual stocks, your performance is tied to the fortunes of just one or a couple of companies.

Who hopes this is a bit more explanatory for you...
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