How to Understand the Mutual Fund's Offered in Your Company's 401(k) Plan

Pensions are no longer being offered by Corporate America. Your company now requires you to invest in a 401(k) plan. You probably don't know much about a mutual fund yet you have been given a choice of 20 to invest in. Follow these procedures to help you make the correct decision.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Computer
• website address
• paper
• pencil

1. Getting Started On Your 401(k) Plan (www.jab401k.com) Review your company's 401k plan. Identify the name of the mutual fund and the ticker symbol. Make a list of each ticker symbol so that you will have it readily available when you go to the website. Allow one page per ticker symbol. You will be recording more information later.
2. Go to the website www.marketwatch.com. Put the ticker symbol information in the appropriate box. This box is located in the upper right hand corner. As an example, put (PSPFX) ticker symbol into the box and hit search. Page one comes up and is titled Mutual Funds Overview. The second line gives you the name of the mutual fund, US Global Resources, and the third line tells you todays closing price.
3. Next, look at the yellow bar chart. The yellow bar chart shows how this mutual fund price fluctuated for the past 12 months. To the right of this chart you will see 52wk H/L (high and low). This is the same information that was in the bar chart on the left, only in numbers. Subtract the low figure (number on right) from the high figure (number on left). This gives you the "spread for that mutual fund". The spread is an indication of how much can be made when the stock goes up. You will want to write this information down.
4. Record the expense ratio number shown in the middle of the page. This is the cost of doing business with this mutual fund company. This charge is usually paid by your company but is good for you to know when you make investments outside of your 401k plan. Record the top 10 holdings near the bottom of the page. These are the companies that this mutual fund invests in. This will help you make sure that you are not owning the same types of securities. Return to the top of this page and select "expenses".
5. Getting ready for retirement On the expenses page, go to the section titled Distributions. Record most recent income dividend, most recent capital gain, and dividend frequency. Repeat this step for every mutual fund included in your company's 401k plan.

Tips & Warnings

• You have just taken the first step of many to understanding you company's 401(k) plan. Look for additional "how to" instructions.