first of all, congrats to the OP who started this first step at 18. here is 2 cents from someone who has invested for the past decade: 1. read Jack Bogle's The Little Book of Common Sense Investing. you will realize that mutual fund investing is a a loser's game for the investor. I assume you are getting 3% company match on the 6% you contribute, so even though there is limited options in the 401k plan, 50% instant return on your money cannot be beat. Choose a strategy that mostly mimics a stock market index, and stick with it.... later on when you switch jobs, you will have the chance to roll the 401k funds into an IRA account, where you can just buy an index fund, or index ETF. 2. read What Works on Wall Street by James P. O'Shaughnessy you will realize that in the long run, the so called 'aggressive growth' strategy actually perform poorly compared to value investing. Therefore do your homework, and find out what the 'aggressive growth' allocation really is. Again, follow point 1 above, you will do better in the long run, just by indexing while keeping the cost down.
Ok, Mr. Financial Advisor. No point arguing with a stubborn mule. And if mutual funds/401k don't hold treasuries, Michael Jackson doesn't like little boys. Holy cow, ladies and gentlemen we have a genius on our hands. Keep reading that Morningstar. It will do wonders for you. WoW.
Although your funds will be matched by your employer, I still stand by my opinion that 401ks are nothing more than glorified savings accounts. When you factor in the massive inflation we are currently bearing and the big tax hit you're going to take when you want to access the money, you'll soon realize how much of a scam it is. Read Mystery of Banking. You can google it and easily find it. The one thing from it I want you to understand is that a Central Bank aims to devalue a currency 95% over 40 years. That's right $1USD is to be worth $.05 in 2048. Do you think some big dog over at the investment company trading your funds really gives a rats ass about you or anyone else at your company? Take investing into your own hands, don't trust the pundits. I greatly respect you for your prompt interest in your retirement. You are way ahead of the crowd. Kudos to you.
the OP is 18 years old and just started out..... your advice, while not totally invalid, I guess is gonna confuse him more than help him. 1. technical analysis, in the popular form (as published in all the books you can read in Barnes and Nobel), does NOT work, therefore learning it is only a waste of time. 2. refer to my other post regarding value investing..... and define what you mean by 'AGGRESSIVE'. if 'AGGRESSIVE' means chasing what has been hot as of late, such as emerging markets, oil, gold etc.. It is highly dangerous. 3. regarding moving average.. it does NOT work. A beginning investor will do better by indexing while keeping the cost down. This is a proven strategy to build wealth over time.... and refer to my other post on Jack Bogle's book regarding 'having somebody watching your money'. Conventional wisdom says one needs to be aggressive while one is young. I say one needs to do the most sensible at all ages. Aggressive investing is not sensible, based on the 2 books I recommend. For an 18 year old, who has 40 years till retirement, every $1 grows to $45 after 40 years, assuming compound return of 10% per year. if he pays somebody 1.5% per year to 'watch his money', while not able to outperform the market, at 8.5% compound return per year, that $1 only grows to $26 after 40 years. For a 38 year old who has 20 years till retirement, every $1 today grows to $6.7 Just simple math above says 2 things: 1. keep your cost DOWN, don't pay people who can't outperform. 2. do the most sensible thing.. the risk is actually HIGHER at younger age, because every $1 you lose, you are $45 poorer at retirement, comparing to the 38 year old who will only be $6.7 poorer at retirement. Keep it simple, keep it consistent, keep it sensible..... that is the guaranteed way to wealth.
I'm understand your point of view. However I offered the same advice I wish I'd have received when I was OP's age. And I offer it with a lifetime of investment experience... and I'm also a CFP. (Doesn't make me right, but I'm not talkin' out my ass.) BTW... TA DOES work if you learn how to use it properly. (I know, I know... there are LOTS of whining ET posts about how "TA doesn't work"... but you gotta realize that there are LOTS of dumbass posters here and you need to learn who's got wisdom and who doesn't.)
of course TA works, otherwise there would be no successful daytraders, which is obviously not true. conventional, popular TA does NOT work. example - stay on the same side of the moving average. Research has shown that staying on the same side of the moving average ( or any derivative of this, such as cross-over of double, triple, quadruple moving averages), only provide marginal improvement over indexing. Considering commissions/slippage and most importantly, an investor's discipline needed to follow such form of TA, the odds are he'd do better with dollar-cost-averaging into an index fund and just sitting on it. There are much more robust forms of TA, but that takes years of practice, not only in the techniques, but also in a investor/traders psychological fitness to be able to apply efffectively and consistently outperform the market. Therefore, for the average investor, especially a beginner, dollar cost averaging into a low cost index fund is the most sensible.
All heat and no light here as usual. Guys, why don't you look at the actual fund the dude is investing in rather than arguing about what the word aggressive means. His screen shot shows John Hancock Lifestyle Aggressive fund, JALAX. Here it is at Morningstar: http://quicktake.morningstar.com/FundNet/Portfolio.aspx?Country=USA&Symbol=JALAX In my opinion, this is precisely how an 18 year old should be investing their 401k. All stock, about a third foreign, about a third mid cap or smaller. This is <i>certainly not</i> a reckless fund for 100% of your investment with a 40+ year time horizon. This is <i>certainly not</i> going to take 50% much less 90% drawdowns on a regular basis. This is an aggressive but prudent investment choice by the original poster, who is clearly quite a bit smarter than a lot of the clowns posting in this thread. Martin
If he DCA's into mutual funds, he probably won't bother to be learning what he needs to know... of course, he probably won't lose $100 either. The education is worth much more than his piddling capital at this point in his life.
remember to stick to your guns. part of being successful at this is persuing your OWN strategy because you will never have the will to stick with someone elses when the going gets tough. check out 'triumph of the optimists' for a good history of the markets - it will also give you the will to stick it out when the going gets tough and the pundits get talking also it is important to be in the right sectors, even for the long haul...if you look at the history of the indicies, a large number of the original sectors are tiny or no longer exist, think railroads...and there has been explosive growth in some new ones...think biotech good luck!
Right on Morreo! Go all out at your age. If you lose money initially keep buying, buying, buying! In fact, the best thing that could happen to you at this age is losing money. Best of luck to you. This is easily your best ticket for retiring at an early age!