Wednesday, October 28, 2009

Your 401(k) is like a Halloween

I know what you’re thinking. Your 401(k) is like Halloween because it’s scary. Yeah your portfolio may not be doing so well right now, but it’s still a sweet deal. Roll with me for a few minutes while I explain how it’s actually like the best part of Halloween—the candy.

Being a kid is all about acquiring candy. What kid doesn’t love Halloween—the mother lode? You get to dress up in crazy costumes and people just give you candy.

It’s not unlike your 401(k): You get to pick a mix of investment vehicles from a variety of industry and play like you’re a big time investor. All you really need to know is your age and risk level to help you choose a direction.

There is no good reason for not participating in your 401(k). Just like there is no such thing as not having a costume on Halloween. I don’t want to hear about how you don’t make enough money to participate in your employer’s 401(k) program. Of course you should go for the largest allowable contribution you can, but even 1% is something. And it’s pre-tax dollars. It’s taken out of your check before you even see it. You’ll never miss it and even better you’ll never spend it.

And then there’s the free candy part. Many employers will match your investment to a certain level. It’s almost too good to be true. It’s doubling your money! You’re not going to get better odds at Vegas.

Even in this lousy economy your 401(k) is still fun. Right, I heard you the fund’s performance is pitiful, mine too. But what you don’t see is that you’re actually purchasing more of your investments. It’s as if they were on sale. For the same dollars invested you’re getting more pieces of candy. So when the market does turn around you’ll fill your sack even more.
It’s time to start thinking like a kid again and get more candy.

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