How to Select Investments Within Your 403(b) Retirement Plan

Once you are signed up for a 403(b) retirement plan, you'll need to determine how to allocate your contributions. In other words, you need to choose where your money will be invested.

Difficulty: Moderately Easy

Instructions

1. Since 403(b) plans are limited to mutual funds (rather than individual stocks), look for no-load mutual funds. (No-load funds don't charge fees for buying or selling.)

2. Determine your risk tolerance. Are you a risk taker or a more conservative investor?

3. Use your risk tolerance to drive your 403(b) fund choices. If you are an aggressive investor, consider sector funds (e.g., technology). If your tolerance for risk is moderate, look at growth funds, and growth and income funds. For the conservative investor who wants to sleep well, bond funds or balanced funds (a mixture of stocks and bonds) may make the most sense.

4. Utilize the financial section of a newspaper, or the Internet, to track and monitor the performance of any fund you are considering.

5. Assess a fund's past performance, fees and expenses, risk rating, and manager before making a decision.

Tips & Warnings

• The closer you are to retirement, the less risk you should take.
• Longer life spans have increased the number of retirement years - you need to continue to increase the amount of your money, as well as protect it, during retirement.
• By contributing regularly to your 403(b) plan, you are automatically practicing "dollar cost averaging." This means that your dollars buy more shares during market dips, while the value of your account increases during the upswings.
• Don't be fooled by the "new economy." Focus on the "buy and hold" rather than the "get rich quick" philosophy of investing since it is virtually impossible to time the market. Remember, these are your retirement funds.
• If you feel you need professional assistance in selecting funds for your 403(b) portfolio, use a fee-only financial planner (see Related Sites) so you are not paying extra fees and commissions.