The Easiest Way to Invest Your 401k When You Know Nothing About Investing

So you just landed a new job and the company is offering you the opportunity to participate in their 401k plan. Great news! But how do you invest it?

Don't let the fact that you may not have any investing experience intimidate you or scare you away from participating. You cannot only make contributing and investing in your 401k an effortless experience, it will also be extremely beneficial to your retirement down the road...no matter how far away retirement might seem.

When many professionals discuss investing in 401k's, they will often use terms such as, "park it and leave it" or " buy and hold." While these are indeed constructive methods to investing for retirement, your money still needs to be put in an actual investment(s) (mutual fund, stock, etc..) that is appropriate for this approach.

This may seem like a daunting task if you're not an experienced investor, but it need not be.

The easiest way to apply the "park it and leave it" approach in your 401k is to invest in target date funds. Target date funds, aka life-cycle funds, aka age-based funds, are mutual funds that are designed that their asset allocations automatically adjust to roughly fit the financial stage you're in in your life. In other words, target date funds are more aggressive when you are young and can afford added risk, and gradually become more conservative as you reach retirement age.

You'll be able to recognize target date funds because they'll have a year in their names. This year represents your expected retirement date. Find a target date fund that is closest to when you plan to retire, park your contributions in the fund, and leave it alone. The fund will do the rest of the work for you. It's that easy!