Generally speaking, do most 401k plans allow the participant to invest in individual stocks?
And by individual stocks, I don’t mean the company’s stock. I’m talking about non-employer stocks traded on an exchange.
In addition, do most 401k plans allow the participant invest in any mutual fund of his/her choice? Or do most 401k plans offer only a limited mutual fund selection?
*I know plans vary. But, this is just a general question.
No, it’s not always investing in stocks. It all depends on what your company offers.
Adam,
A 401K is like a shopping cart in a supermarket. You can buy any type of investment from a stable stock such as Exxon to a speculative venture capital stock, to a mutual fund, to a corporate bond, to a municipal bond, or anything else. I would advise you to diversify your portfolio as much as possible. You are not obligated to buy stock in your employer’s company.
A 401K is handled by a third party investment firm. Your company only knows how much you have contributed to your 401K, but not what you bought with it.
Hate to disagree with Sean but sounds like they’re referring to an IRA in which most investments are ok to use.
The vast majority of 401k plans have limited mutual fund type investments to choose from. Legally, the employer is required to monitor any offered investment options for suitability. So they generally only offer a limited amount of funds.
There are some plans that offer a brokerage option as a alternate to the standard investment options. With these brokerage options, you could pretty much buy anything. But the fees are high. I would say this brokerage option is in less than 3% of plans.
This all being said, choosing a few different funds in your 401k is probably a more profitable option than stock picking in a brokerage account.
Scotland is correct.
1) No. Only mutual funds.
2) No. Only the funds that the plan offers.