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First, be thankful you are down only $900 (or 4.5%) this year. Its been a rocky year. Many are down more than that just in December.

Next, few 401k's will allow you to select your own investments. Most offer a limited range of managed accounts, usually mutual funds.

Your first step should be to research each of the funds you are offered. You should probably choose an S&P 500 index fund or a large cap mutual fund as your core investment. But some people prefer a total market fund instead. Some would add a international fund for part of the funds. Most 401ks offer bond funds or fixed income funds, sometimes money markets.

Now is a bad time to invest in bond funds because navs will decline while interest rates are rising. It could be a good time to accumulate bond fund shares while navs are down. That works for regular new contributions but is not a good place for a large lump investment.

People who are very nervous about losses in the stock market or perhaps close to retirement will sometimes select fixed incomes to preserve capital. However, low interest rates make those and money markets not so attractive.

Equities should give the best returns over time. Think long term. The down market makes it a good time to invest new cash just now. But it depends on where the funds are coming from. If they are down temporarily and likely to recover, investing in something similar to what you have had can be a good move.

You will want to look at the performance of the funds offered. 1 yr, 3 yr, 10 yr data are often provided. Compare performance with the appropriate index. You want a fund that consistently beats the index. Or at least funds that match the indexes. Under performers should be avoided.

You will want to look at the funds loads (no load preferred), expense ratio (lower the better), 12b-1 fees (ideally none), etc. Recent changes in management. Any other charges.

Most of this info is available on Morningstar.com, or it should be in the fine print of the fund prospectus.

Best of luck with your choices. Ask away if you have more questions.

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