Everyone seems to have a 401k plan and everybody seems to follow the 401k tips and advice that they hear about always invest money into the plan. So, they simply keep investing into the plan.Yet not many people know much about it.We are suppose to use your 401k to invest for your future, but very few people actually take the time to learn about it and what it is about until it is just too late for it to make a difference.
So, before it is too late here is some basic 401k facts.
You probably know all about the tax benefits. Your money is taken out of your check and invested before it can be taxed, but where exactly is it invested?
Most of the time that money is simply used to invest into mutual funds. It may be that the funds which you are investing your money into are seriously underperforming the market.After all the number one concern for most mutual funds is not to make their investors a killing but to get more investors and convince those potential investors that they will make a killing if they invest into the fund.
This is why if you have the time to spend and you want to learn you can make a much higher return by managing your money yourself. If your company offers a self directed 401k option where you can decide where your money is going to be invested into then it is defiantly something to consider.
Another thing to consider is investing into real estate with your 401k in addition to stocks. Some plans will only let you invest into funds that invest into stocks, but not all.Some plans will allow you to invest into Real Estate by buying an REIT.
A REIT is a trust that invest into real estate. The company basically takes money invested into it and buy things like apartment buildings, and commercial buildings.Then the profits are split between the investors.
This can be great for diversification purposes because you become less dependent on what happens in one market.
