When you receive your 401k statement, you probably glance at it quickly and wonder if you should be doing more to manage your account, especially now that you have the ability to switch your investments with a phone call or a click of your mouse. The correct answer is C, but surprisingly, the mistake most people make with 401ks is not trading too often, but rather, never trading at all. Quarterly reviews needed When you receive quarterly reports, check to make sure your money is being allocated as you designated and review information on your individual stocks or funds to see if any shifts are warranted. Due to performance, one fund may now be too big or too small throwing your original diversification out of whack. You'll also want to keep an eye on changes in management at the fund or a change in the nature of a company's business fundamentals that alters the outlook for its stock.
Some advisers recommend rebalancing twice a year, but doing it at least annually is essential.
Make changes as your life changes Your annual review should also take into respect any life changes. If you marry, you might want to jointly plan an allocation strategy that takes into account the investing options in your spouse's plan. When you are five to 10 years away from tapping your account, you probably want to consider reducing equities and increasing the income portion of your mix. Next steps Review your 401k statements . Inc. All rights reserved.