What to suggest to son in first 401K?

[Alan]

A stronger suggestion would be to ignore his 401K balance for the foreseeable future.

That is one bit of advice our son has definitely taken to heart - he hasn't a clue what his balance is in either his 401(k) or Roth, so I've stopped asking

(I know he contributes as I help him do his tax return each year)

 

[Milton]

He's a bright kid, but at this point, he doesn't seem to be interested in learning about investing. I expect that will come later, but right now he's just concerned with getting fully engaged with the new job.

That is neither surprising nor inappropriate.

What would you suggest for a 23 yr old who is very risk adverse for his 401K? Would it be a terrible suggestion to let him accumulate a balance in a Stable Value type fund, and then recommend he start investing into something more like a balanced fund? I am afraid if he goes into equities first thing, and the losses start to stack up, it will spook him away from the market forevermore.

I think your fears are well-founded.

We all have to make our own journey in investing, and make progress as we go. To some extent various stages can be skipped if we educate ourselves (through books or the advice of others), but he isn't terribly interested in that right now.

I'd suggest some sort of plain-Jane fixed income product, which will appeal to his risk adversion and where the advantages of compounding will be readily apparent. As jblack notes, at this time the most important thing is to cultivate the habit of regular contribution towards retirement savings. Identifying the optimal risk/return balance, and achieving diversification, can come later.

He has asked for our opinions or I'd stay out of it!

Good point!