Wtf do I do with this 401k?

Most 401k plans have at least two investment options: stocks and bonds.

• Stocks = you own a piece of the overall value of the company
• Bonds = you made a loan to a company or to the government and are owed repayment with interest

Stocks generally have higher returns than bonds. However, they also carry more risk as the value of a stock changes more frequently and dramatically than that of a bond.

We believe that for most of your working life, your portfolio should be 100% stocks. This is because:

• Higher returns for longer periods means more money when you retire
• You have a longer time horizon to make up for losses when they occur
• Stocks are cheap and easy to access in a 401k
• Your working income can be viewed as a bond that offsets some of the risk in owning stocks

Once you decide to allocate to stocks, the question is what kind? The universe of available stocks is broadly split by region of the world and by size of the company.

Below is an explanation of the detailed allocation illustrated in the pie chart:

• US Large Cap = large companies based in the US
• US Small Cap = small companies based in the US
• Europe = large companies based in Europe
• Emerging Markets = companies of various sizes based in developing economies

The chosen allocations are more of an art than science but represent a roughly appropriate balance between risk and return of these various types of stocks.

Beginning at 15 years before your retirement, we start to move from stocks to bonds (which, again, are safer investments). This aims to preserve the money you've made by reducing the risk of a loss in value.