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Basics of 401K Management

401K Changing Funds, Good Idea or Bad Idea?

This question was posted by maude in our Ask Savvy community group. She wants to know how to make the most of her 401k. I reached out to John Rosevear, Motley Fool contributing writer from The Motley Fool, the go-to website for investing, to share his expertise with us.

I have been contributing to my 401K for several years now and I have been using the retirement-based fund where the company bases the returns on when you are going to retire, I am a long way off from retiring but I was looking into other funds to see the performance and realized a lot of the other mutual funds seem to be performing much better. Should I move my money around? Or just play it safe in this sort of economy? I know I have 40 plus years before I retire but I want my money to do the most for me, I mean really doesn't everyone! Any tips with how to make the best of our 401k? Just curious how often do people move theirs?

To find out what advice John has to give, read on.

Those "target-date" or "lifecycle" funds, in which you pick the fund with the date closest to your expected retirement date and let the fund managers do the rest, can be great choices — for those who can't or won't take the time to learn about investing.


But for someone like you who is willing to learn more, they often aren't the best option. See, they're designed to be one-stop alternatives for people who might otherwise just leave all their money in a money market fund, so they tend to err on the side of taking less risk. Typically, their holdings skew toward slower-growing large-cap stocks, their asset allocation mixes tend to be quite conservative — and because of their complex nature, they sometimes have higher fees and expenses than "normal" stock funds.

Add all that up, and over time it's no surprise to see them underperforming some of the other stock funds in your plan.  So should you switch, even with the market in turmoil? I'd say yes, it's totally fine to switch funds every now and then – but as always, be smart about it. Your plan probably has an online tool that will help you figure out how much risk you're comfortable taking – use it, and then move  your money into funds that have strong track records, but aren't so volatile that they keep you up at night. Good luck!

Ask anything budget-, etiquette-, or planning-related — well, almost anything — by posting your questions in the Ask Savvy group, and I'll find the right expert to help you out.

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maude maude 5 years
Great tips, looks like I will be moving my money! I can care just a little more about more 401k!
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