Being smart with your retirement investing is the key to financial security. But many investors don't know how to choose the best funds from their 401(k) plans. What should you look for?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, talks about how to pick the best funds in your 401(k). Dan notes that most companies have limited options for investing in retirement accounts, forcing you to make some tough choices. But Dan suggests focusing on low costs, avoiding expensive fund options in favor of simple solutions like index funds or ETFs such as the SPDR S&P 500 (NYSEMKT: SPY ) and Vanguard Total Stock (NYSEMKT: VTI ) if they're available. Dan also advises that you look to see if your 401(k) has a brokerage option that gives you the opportunity to buy individual stocks, but you should also be wary of extra costs involved with the brokerage option compared with the discount brokers you're familiar with. Dan concludes that you can usually find good options in your 401(k), even if they're more limited than you'd prefer.
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