What would be the investment plan?

I am opening my 401(k). If I contribute, my company will match of to 4% of my paycheck, they also put in .50 cents for every $1 I put in. I know this is good, and I would like to start contributing, but I do not know which would be best for me. I am only 21 and at the moment I am very gutsy about it. I would prefer the higher risk in hopes for a good return. I know my age puts me ahead of the game. the average person starts their 401 around age 25. I look at that as having a 4 yr advantage. If i lose my money I'll start all over again I do not see this as a big problem. I don't plan to get rich, but I would like a decent nest egg when I retire considering the whole social security dilemma. Now the company has been kind enough to break this in some pretty simple options. I would like some advice from knowledgable persons on where the best places are for my money. First, there r life strategy options. these you can choose your age and they adjust a % for high risk and a % for low risk

I am not interested in the life strategy option. Next we have when u plan to retire. The sooner you want to retire the higher risk. Originally I had planned on choose this option and simply selecting ot retire at least 10 years earlier than I plan to. Or, you can choose your own all together. The options include: Stable value fund, bond fund, large co. value stock fund, large co blend stock fund, large co. growth stock fund, mid co. value stock fund, mid co. growth sock fund. small co value stock fund, small co growth stock fund, and international stock fund. I definitly would like some international stock fund I think. Mayb around 20-30%. In your opinion, do u think that is wise? I am open to all opinions. I have a limited knowledge of this.

Put as much as you can possibly afford into the 401k. It's taken out pre-tax and with all the matching you have going on it can't be met investing elsewhere. It may seam like a lot out of your budget now will will pay off big in the long run. Now most accounts allow you to change where the money resides after a short period of time usually you can do it on line, so just choose what your comfortable with to start, sort of middle of the road. Then once you have access to on-line you should look for long term investing but you still want the highest rates you can. Check out those that have a 20-30 year track record and still get around 12% or so. Don't look at the 17% funds only out for less than 5 years. Also diversify into different areas 30% High, 30% Med and 30% Low risk, there are usually great performers in each category. 401K is a retirement account, by you thinking and contributing now you will be a millionaire by retirement. When and if you leave this company this money will be rolled into another account, if you take any money out before 59-1/2 years old you will pay high tax rates and penalties. Therefore you may also want to invest other money into an after tax money market account later on that you can then use for things such as down payment on a house, or other emergency without being taxed.

I heard the other day that saving $4,000 a year from age19-24 was equivalent to saving $4,000 a year from age 29 till retirement. Both were estimated at $1.2 million total. All compound interest of course. ROTH IRA would be best, but if you need more liquidity use a good diverse money market. Report It

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There are 2 key factors you should first focus on:
1) The ratio of stocks to bonds. Studies have shown that this is the key determinant of risk and return of a portfolio in the long run.
2) The costs that these funds charge. Little differences in costs compound to very large differences in final wealth.

Once you have those basics down, it won't matter so much how you allocate your money into the various stock funds. Remember that noone can know what the absolute best allocation plan will be over the next several decades. So, don't loose sleep over issues such as your percentage of foriegn verses domestic stocks or your percentage of small-cap verses large-cap stocks.

The fact that you are starting so early in life bodes well for you. This alone will probably ensure your success. It's because compounding will have a chance to work to its fullest.

Here's an interesting point. If you earn an average 8% annual gain over a period of 30 years, HALF of your retirement nest egg will be from the first 8 years of contributions (and their compounded earnings). The other half will be from the remaining 22 years.

Read my book. It will teach you everything you need to know about investing, and it is information that can be used for the rest of your life.

Congratulations on having the foresight to plan for your future. As a professional planner, I occassionally see younger people start early and with compounding, you will get a very fast start. But, please remember the funds you contribute to your 401(k) are monies you should not touch until retirement. Think of this as your personal pension plan.

All too often young people start out with the best of intentions, but because they don't have other savings or investments, as soon as they need to buy a house, pay off debt, or get in a bind, they tap into their 401(k). It is self-defeating.

When you change jobs, rollover your 401(k) to an IRA and let the funds grow. Don't get overwhelmed by your investment choices. You have perhaps 40 years of growth. Invest in stock funds and, in fact, the life strategy option is not necessary a bad choice because the money managers allocate the funds in a diversified portfolio over your "lifetime." Inherently, this will decrease your risk as you age.

But, reality suggests you will probably change jobs several times before you reach retirement in which case you won't have this 401(k) plan. Furthermore, your employer will certainly change the plan many times over the next 30-40 years. So, instead, I recommend investing 1/3 large cap, 1/3 small cap and 1/3 international, and maintaining that strategy for at least the next 10 years regardless of the market performance.

In other words, if and when the market's drop, don't change your strategy. The name of the game is to accumulate the most shares (or units as it is often called in 401(k) plans). Even if everyone else is telling you to get out of stocks and go to stable value fund, etc. ignore the layperson's advice. This is a long-term plan and you need to be aggressive while you afford it. Your defense is time...and, believe me, that is a great gift.

With that said, if you are also looking to save an additional $50 a month outside your retirement, (which is smart, so you don't have to dig into your retirement plan when you need money) focus on building up your personal savings account first. Even though the yield is low, the liquidity is important. Once you have 3 months worth of income saved, start systematically investing in a mutual fund on your own. Be more conservative and look for a balanced fund (balanced between stocks and bonds) until you build up a core foundation. Then you can add, over time, with more aggressive mutual funds and eventually even individual stocks.

That is how you build a sound portfolio - over time. Patience and discipline are your best virtues when it comes to building real wealth.

There are plenty of professional advisers who will gladly help you get started. Go to a local bank or brokerage firm. Don't try to do it yourself. Again, it could very well be self-defeating.

Good luck!

Contribute as much as you can to get the match from your company. I agree with your plan to put 20-30% into international. I would split the rest more or less equally among the seven stock funds. At your age, ignore the bond fund for the next 25 years.

The stable value fund is a short-term bond or money market fund, which isn't of much use inside of a 401(k), so ignore that also. However, you do want a money market fund outside of your retirement fund. Vanguard MM Prime currently pays 5.13%. Put your emergency savings into something like that. One you have at least $10,000 in emergency savings, you might consider opening a Roth IRA and buying a stock mutual fund. Stick with something simple and inexpensive like Vanguard Total Stock Market index fund.

Regarding savings bonds, I have a few but am not buying any new ones. If you want to get a few, I would suggest the "I" bonds and don't bother with "EE." My expectation is the "I" returns will be better most of the time. Open a Treasury Direct account rather than dealing with paper bonds.