Should You Actively Manage Your 401k?

how to manage your 401k account

Are you qualified to manage your 401k account?

Most people think the job should be left to a “professional.” That’s why so many 401k accounts are parked in mutual funds. These funds often charge high fees (which can eat into your returns), and may not be doing a good job for you.

Is this really the best option for you?


Editor’s Note: This is part two in our series on how to invest your 401(k) account. See also:


You may not realize that you probably have lots of options to manage your 401k account.

Most 401k plans are initially set up to make it easy for you to buy mutual funds. But you can also set up a brokerage account (sometimes called a brokerage-link) which you can use to manage your 401k account.

By using this brokerage link, you have much more flexibility in deciding what to invest in. This means that instead of paying a mutual fund manager to invest your capital, you can choose your own investments.

This gives you more control, and a lot more investment options.

Let’s quickly compare actively managing your 401k with parking your 401k capital in a mutual fund…

Advantages if You Manage Your 401k Account

The thing I like best about managing my own 401k account is the fact that I can generate more income.

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By using a handful of special investment strategies (which I’ll share with you soon), I can collect cash payments from the market. These payments add up, helping me grow my 401k account much more quickly.

A second benefit of choosing to manage your 401k account is that you have better control over your investments.

Investing in a mutual fund puts you at the mercy of a particular manager.

This manager may not have your best interest in mind. Also, mutual fund managers have very little flexibility in what they are allowed to own. So putting your capital into a mutual fund limits the investment opportunities you can pursue.

A third reason you may choose to manage your own investments is to avoid excessive fees.

Mutual funds charge you fees, based on how much money you have invested in the fund. Those fees hit your account whether the funds make money or not. Over time these fees add up and can really eat into your returns.

These are just three of many reasons I’m in favor of managing your own 401k account.

Reasons For Passive 401k Management

While I think managing your 401k account is a smart move, there are certainly reasons you might choose to passively put your money in a mutual fund.

For starters, maybe you just don’t want to think about your investments on a day-to-day basis.

I get that.

You’ve probably got a job, a family, and plenty of other things on your mind. Why choose to spend more time researching investments and choosing how to manage your 401k? Choosing a mutual fund is a much easier way to invest.

A second reason you might choose a mutual fund over managing your 401k is that you don’t have good investment ideas. Hopefully, you’ll stay tuned to this website and get some great ideas each week from me.

But of course if you don’t know what to invest in, you’re probably going to stick with mutual funds.

A third reason you might choose a mutual fund is because you’re afraid you might lose money. Many friends I talk to think that a mutual fund manager would take less risk with their investments.

Unfortunately, this isn’t usually the case. mutual fund managers are often just as risky as individual investors. Especially because they don’t often have “skin in the game.” Without proper incentives, these managers may have no reason to protect you from losing money.

Make an Informed 401k Choice

Whether you choose to manage your own retirement through a 401k brokerage account, or you invest in mutual funds, you need to know the positives and negatives.

I believe that you can manage your 401k account, even if you don’t have an investment background. The key is to find someone who can give you good advice along with timely ideas, so you can choose your own investments.

We’ll be talking about some great strategies and opportunities for you on this website.

If you’re not interested in managing your own 401k account (and that’s probably not you if you’re reading this article), that’s fine. But just know that you’re likely missing out on some great opportunities by leaving your retirement in the hands of a mutual fund manager.

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