Mutual Funds Are the Way to Go For IRA-401k Funding


From 1991 – 2007 I increased my company 401K plan over 3,000% using company stock and mutual funds. ETF’s are popular, but they are passive, index managed vehicles with subpar gains most of the time and hard to pick if you do not know what sector is hot.

Believe me, I did not earn a fortune in the insurance industry during the 1990’s and early 2000’s. Religious payroll contributions of 6% did the trick. Plus I was in the hot service sector and my company stock increased 1200% in one case and 500% in the other when my division was spun off. Sure lucky me, but the 2000’s brought a private buy-out of my division turned company now turned private equity. Mutual Funds were the only game in town: between 2001-2007 I increased my portfolio 11.36% annually with just mutual funds in the Small Cap and Value arena.

The next 3-5 years look good for stocks after we get over this last hump of the recovery and the Fed slowly raises interest rates in a timely fashion. Company stock should do well and a 25% allocation in an IRA-401K plan would be a prudent investment choice.

As far as mutual funds, I would go a mix of Small Cap and Value…..the two areas that take off after a recession as new money is poured into R&D at small firms and Value stocks become the hottest in thing. Slow and steady investment and dollar cost averaging never hurt anyone, especially the 20 and 30 somethings who have time to over come downturns in the economy.

But some of you might be saying, why is this 50’s something guy smiling after the Financial Crisis of 2008? I was ALL cash since 2007! After the Dow backed down from 14,000 level, I knew the party was over for a while. One thing all investors should have is a stop in mind in ANY investment be it with investment monies or IRA-401K monies.

Watch your investments monthly or better yet bi-weekly and have a level when it dips to go to mainly cash while being eligible to remain in the mutual funds you are in. Hopefully, your 401K plan is good and matches not only company stock contributions but also mutual funds contributions as well.

Become a student of the market! Its hard with a job I know and now that I day trade, I have the time on my hands that you may not have.

Learn, prosper and good luck!

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