Stocks are shares of publicly traded corporations, traded on the major exchanges like NYSE, AMEX, and NASDAQ. Mutual funds are managed portfolios of specific stocks: Some funds are aggregates within the same industry. Others are purposefully diversified. And some mutual funds follow a philosophy; for example, investing in emerging technologies or environmentally-friendly (“green”) companies.
Commodities are traded shares of natural goods, like foods (corn), metals (gold), fibers (cotton), etc. Bonds are certified loans made toward projects, often sponsored by the government. You may also have the option of following other types of investment structures, including an IRA, Roth IRA, and a Roth 401(k). We’ll explore these in other articles.
Financial management firms–their planners and brokers–manage your 401(k) portfolio on your behalf. You may like to befriend your broker if you’d like to have more control; most likely, they’ll only want to deal with heavy hitters. It helps if you sound like you know what you’re talking about.
Most firms provide some guidance by asking which investment strategy you’d like to pursue: Aggressive, conservative, or moderate. (The firm may use synonyms to these–but it’s often these exact words.) You can always switch or modify your investments. No strategy can guarantee returns, but it’s a quick way for you and your broker to follow the same general strategy.
Your investment strategy tends to fit your personality. I recommend young ambitious professionals to start out with an aggressive strategy. The risk is high; the potential gain is greatest. This is the best time to go for establishing your portfolio: with the fewest obligations and the most time to recover from any unforeseen disasters.
Previous Page Next Page
