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You are 31 yo and have your whole life ahead of you. Do you plan to marry and raise a family? Do you plan to own a home? When do you plan to retire? Age 65? Sooner?

For most in your age group there are too many unknowns to work out a detailed plan at this point, but one of the best things you can do for yourself is develop a regular saving program. It sounds like that is what you are doing. Good for you.

401K contributions are an excellent program especially for retirement savings, and the fact that they automatically make payroll deductions makes it easy and convenient.

Roth 401K is an excellent program. Yes, the employers match portion pays the best returns. The match is free money. But maxing the plan is excellent too. It depends a bit on your income tax bracket. At 31 you are probably in lower brackets now than you will be later. Hence, Roth is a good plan. If you are in high tax brackets, pre-tax contributions to 401K can be better--assuming your income tax rate will be lower in retirement.

Mutual funds are usually evaluated by comparing their rate of return with that of other similar funds. Morningstar is an excellent service for that comparison. Look for funds that are rated 3 stars or better. Highest rating is not necessarily best as many do not repeat in the top ratings. But low ratings are a problem.

You also want to look at fees you pay. Loads, expense ratio, 12b-1 fees. Look for funds from a well known company that consistently outperform and have low expenses to you.

The volatility of the stock market make comparisons just now difficult. But keep at it and you will get the picture on which ones are best.

If you plan to invest in stocks, a self directed IRA at a discount broker is the way to do that. But how do you select the stocks? If you have the time to keep up with stocks, that can be fine, but most working people with busy schedules find mutual funds a better choice. Those can be owned through a brokerage account, but most begin at a mutual fund company where annual expenses are low.

Discount brokers usually charge $8 or so per trade. For 2% expenses, that makes your minimum investment about $400, but more is better. Reinvesting dividends in brokerage accounts can be costly. But if you make regular contributions, holding dividends in a money market fund and then combining those funds with your next investment can work.

Your investment adviser at a full service broker can be costly. If you rely on your adviser's advice, it could be worth it, but keep an eye on things. Brokers tend to put you into expensive investments that help pay their bills. Other ways cost less, but then you must spend more time making decisions on your own.

Above all, keep doing what you are doing. Monitor the performance of your investments. Learn to weed out the underachievers and do more of what works for you. And remember to pay yourself first. As you get raises and promotions and bonuses etc, make sure some of those go into your savings. Pay yourself first. Maxing your 401K is a good way to begin, but gradually increasing your saving rate gives you more options: to retire early, to fund a downpayment on a home, to fund education of your children, etc, or simply to enjoy some of the finer things in life.

Fool on!!
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