HOW TO BUY STOCKS ONLINE IN YOUR 401K ACCOUNT
It is safe to say that many people don’t own individual stocks on their own. Probably fewer people than you would think are looking to learn how to buy stocks online by themselves and build up their own portfolio. It is just too time consuming for most Americans that have a job and family with very little time to spend studying the market.
Some people’s only exposure to the stock market is through their 401K’s. Most companies have done away with pension plans and now offer a 401K plan where you can put up to 10% of your pay before taxes in and the company will often match a small portion of it. Over the years, this can grow to be quite a large amount and it is, along with Social Security, what most Americans are relying on for their retirement years.
At all times, you can designate how and where you want the money in your 401K plan invested but often times the options are quite limited. Most plans will give you a handful of options that range from conservative to aggressive and these are in the form of mutual funds. When you put money in a mutual fund it is probably one that invests in stocks so you are really investing in the stock market but not as directly as you would be if you bought one stock at a time.
Most 401K programs do not allow you to buy individual stocks and only allow you to put money in the mutual funds they are associated with. Sometimes, if the company you work for is on the stock exchange, you can invest as much as you want in your own companies stock but only that stock. Any other stock investment has to be put into one or more of the mutual funds.
The older you get, the less money you should have in stocks or mutual funds. This is a basic rule of investing that too many people don’t follow. That is why with the market crises of a couple years ago, so many older people lost much of their retirement money. Although they might not have owned individual stocks, they had all their money in mutual funds in their 401K’s which is the exact same thing as owning the stocks. When the market goes down, so does the mutual funds.
As you get closer to retirement, you should be sure to move your 401K money out of the aggressive stock funds and into the more conservative ones or a savings account option if it is offered. Older people have a much shorter investing time horizon as they might need the money at any time. Having most or all of their money in stocks, whether it is in mutual funds or individual stocks, is foolhardy when you think about the risk.
If your 401K does allow the buying and selling of any stock on the major exchanges, it is one of the rare plans that allows such a thing. You should be sure to not get caught up in doing too much excessive trading and remember that you are using real money that is yours. It is easy to get the feeling that you are using play money and forget that all of it came out of your paycheck. Although you may not have access to the money right now (without penalty), you will need it later in your life so you should treat it with respect and invest it as intelligently as possible.
