- Wall Street hides sales commissions on mutual funds making it impossible for the average investor to calculate how much they’re charged in fees.
- The 401(k) was sold to our elected representatives so that Wall Street could get more people invested in their products and increase their profits.
- With so many people investing in the stock market through 401(k)s, IRAs and other tax advantaged retirement accounts, share prices are overvalued.
First, I acknowledge my friend is probably right. Wall Street, those greedy boogers, will stop at nothing to extract more money for less value and fewer results from the American people. I’m more suspicious of them than I am the U.S. government.
Second, if your company matches contributions to your 401(k), I strongly recommend you invest in it. I don’t care how distrustful you are of Wall Street or government, you’ve got to listen to me on this one.
Now, don’t misunderstand me. If you think you can’t make any money, or worse, lose money, by contributing to investment vehicles in your 401(k) or the like, then don’t invest in them. However, most employer sponsored retirement accounts have a cash or cash equivalent fund, i.e., money market account, you can invest in that’s practically risk free. You do NOT need to invest in the stock market, bond market, or real estate market to earn the employer match.
The only significant amount of money you’ll make by contributing to a cash or cash equivalent fund in your 401(k) is from your employer’s match. Of course, the matching contribution depends on what’s offered by your employer, but for many, it amounts to a return of 50% that’s practically guaranteed. Who cares if the interest rate on the fund you invest in is 0.000001%.
Question: Outside of an employer sponsored retirement account, where else can you put your money that’ll yield an, essentially, risk-free return of 50%?
Before I go, I’d be remiss if I didn’t mention this.
For a second, forget about Wall Street. Forget about the government. Do you trust your employer? It is possible your employer will run off with your 401(k) contributions and the match they promised. Check the balance with your 401(k) custodian to make sure the money you’re due makes it to where it’s supposed to go.