Yes, what everybody else says. I was going to answer last night, but my bed was calling. Here's what I was going to say, and it's the same as everyone else -
- You're off to a good start with the 401K. At the very minimum, keep putting enough money in so that you get all of the employer match that is available to you,
- As others have said, open an IRA (Roth probably makes more sense) and put as much in every year as you are allowed (if you have that much to invest),
- If you have anything left over after the above 2, put more into the 401K, up to the max amount you are allowed,
- If you still have money left over (in which case, wow, I'm impressed) open a regular (taxable) account with your broker and put it into that,
- You'll probably want an emergency fund. How much is up to you, and depends on how long-term and stable your employment situation is, as well as your estimate of the likelihood and "gravity" of emergencies happening,
- If you are investing in taxable accounts as well as the tax deferred ones (401K, IRA's), keep the less tax-efficient funds (e.g. bonds) in the tax deferred accounts to minimize your tax liability. Stick to low-cost index funds. Some 401K's offer good low-cost funds, others don't. Look for the lowest-cost funds available to you in your 401K, preferably without front or back loading. With some 401K plans, you have to take the best of a bad bunch but it's still worth doing - if only for that employer match.
- Don't worry about timing the market. If you are putting money in on a regular basis, you are dollar cost averaging into the market anyway. Besides, the market might keep going up for a while. Or it might not. Nobody really knows. You have a long time frame so, as others have said, when you put it in doesn't matter as much as the fact that you are putting it in,
- Your mix of equities to fixed income is up to you, but unless you're extremely conservative, make sure to have a healthy dollop of stock funds. At your age you can go 80/20. You could even go 100% equity funds, but that is up to you. I had about 20% in fixed income when I was working but looking back, I don't really know why because I didn't look at my balances very closely; I just kept working and scooping money into those accounts. Most people feel a bit better with at least something in there to reduce the volatility a bit. It's up to you,
- The most important thing is to put the money away in the first place. You have plenty of time to do some reading, learn a bit more, and adjust your asset allocations later, but you cannot make up for the time lost if you don't put the money away to begin with,
Hope that made some kind of sense. You have time on your side and your older self will be so grateful to your younger self that you started thinking about this, and doing something about it!
