401K Investing Basics

what is up my fellow youtubers welcome back to MKchip money and life TV wherewe talk about how you can improve your financial position career and life I amMike also known as MK the CPA and you guys know my sidekick chipper I'm hereis a video I'm super excited to share with you we're going to be covering howyou can pick the best 401k funds are the best 401k investments and your company's401k plan just so you guys know this is going to be the first video in a seriesthat I'm producing on this so kind of think of it like a class so in thisfirst video what I'm going to do is I'm going to do an overview of the fivesteps and then in their videos after this we're going to go into detail inthe tutorial type of fashion where I show you how I go about doing each stepso that you can mimic my process if you choose to do so.

alright guys and with that being said let's dive right into this so most of ushave heard I'll kind of have an understanding of what a 401k is right Imean it's where you put part of your income into this retirement plan orbasically we are deferring our income for a later time period and whenwe defer our income we don't have to pay tax on that money yet so the idea isguys as you've probably heard instead of being able to invest only 75 cents aftertaxes because we're deferring our income were able to invest a whole dollar at atime and so with that whole dollar you know we're able to buy more units orshares of this mutual fund in other words we're able to let our money growquicker because we're putting we're able to put more in and then it's taxed whenwe take it out at a later date and of course you guys probably know if weinvest in this thing in our 401 K for the next 20 30 40 years we should becomerich are very are wealthy enough to be able to retire we'll be they say will beloaded in cash so much cash you'll be able to buy a boatnow there's only one little problem with this this whole investment idea in our401k we don't frickin know how to invest hey school never teaches us how to doany of this and yet we're supposed to rely on this 401k retirement plan forthe rest of our life are you kidding me so that is why I'm producing this videois because I've come up with a process that has worked very well for me notthat you have to use it but I think it could help you by the way guys I am byno means a professional investor and so please do not take this as legal orinvestment advice however by using this process I reallocated my funds at theend of 2016 are towards the end of 2016 and so far just in this year alone in2017 for the first six months I'm already ahead 20% on my 401k investmentsand it's the best my plan has ever done so I think this process could work foryou or at least hopefully help you get better returns in the future so sinceschool didn't teach us what else can we do to learn about our 401 K investmentslet me think for a second oh I know we know talk to the financial advisorthat comes to our company thanks know what I'm talking aboutit's that person who comes to your company or organization usually everyfour months to give you a market update or when the markets really taking a divethey comes in well we can ask them right we can ask them to choose then best 401kinvestments for us can't we actually we'd be completely wrong if we were toassume that the financial advisors have a thing called a liability although theycan advise us and it's not a bad idea at all to talk to them and learn about thefunds in your 401k plan we cannot expect them to pick the investments for it bothof them will not because if they say ok well you invest in a B and C and then donothing else well what would happen is if later on 3020 30 years down the road you're full on key investments tank well then that'sgoing to open them up to liability this video is about choosing and picking thebest or m'kay investments this is truly about us you and I picking our owninvestment because nobody else is going to do it for us so we if we want thebest rate of return in our 401k plan and the best overall investing strategywe're probably going to have to pull the trigger ourself we can like I said wecan bounce ideas off of them off to financial advisors but we still need tobe the ones in charge of this and with that being said let's start going overthe five steps to this investing process okay guys the first step to choosing thebest 401k funds in your 401k plan is to actually know what the funds are so thefirst step is really fun choices it's knowing what funds are available for youand I in our 401 k plans so how do we do that well guys what we do is if youdon't know where to go to learn about this first you need to go to I wouldrecommend going to a human resources department of your company or whoever isin charge of that and say hey I want to learn more about my 401k plan and thefunds that are available in that plan can you tell me or point me where to goso I can learn more about this and also after whoo-hoo therefore one keyprovider for our company and just so you guys know if you don't know what aprovider is it's usually the plant administrator who's helping your companymanage their 401k plan and so some examples would be one John Hancock -Vanguard are three fidelity those are some of the most common for 1k planproviders in the nation so after you go and talk to your human resourcedepartment what they're probably going to tell you is that there is a websiteonline for that provider so like you can go to Vanguard comm fidelity comm and ifyou don't have an account created already you'll go ahead and you'll setup an account and from there you can look in the website and find the areawhere you'll see all the funds available to you each company an organization isgoing to have a different 401k plan so your fun toys are truly going to vary bythe provider you're for 1k but also how your companyset it up and what in my example I have 60 choices available to me 60 total fundchoices in your plan you might have 100 choices or more you might have less than50 it all varies based on your company and as you guys are doing this processbe thinking of having a pen and paper available that will really help so thatyou can take notes as you go when you're doing your research i really suggestusing Microsoft Excel to do this because you can easily manipulate the data laterand that will help save you time going forward now you're probably thinking OhMike if there's one hundred fun choices how long is this kind of take me is itgoing to take me all day well you know this could take you a couple hours guysbut it is so worth your time to do this you think of all the years we've beenworking for a money and if we're not trying to get the best return oninvestment it can literally cost us hundreds of thousands of dollars by nottaking the time to do this so we need to freak and do this and do it right arethe best we can what I would recommend doing becausethis is going to take some time is break your research into one to two hourchunks and then come back at later time and do some more al

l in all this mighttake you a couple hours I don't think it's going to take you more than tenhours to really go through all of your funds but I would take the time to learnhow to do this okay on to the second step is criteria to narrow down oursearch choices are in our research time required we're going to select somecriteria in that crate because we don't want to be spending the rest of our liferesearching 401k funds none of us want to do that it is not very fun it couldbe interesting for some people but it's not the thing you want to be doing atthe end of the day all the time and so we're going to pick criteria that'simportant to you you know like for example criteria that's important to meis I want to know the fee structure the fee ratio of each fund I want to knowwhat funds have been around over ten years and of the funds that have beenaround over ten years who is performing the best over a ten year periodconsistently those are the funds I usually start to target so if you have ahundred funds in your 401k plan by selecting specific criteria we're goingto try to narrow those down for you so you're really only a researchmaybe 25 out of the hundred funds that way it's going to save you a lot of timeand then after the process after you filtered through this process we want tofind what we believe to be the top 10 or 15 funds in your entire 401k plan and gofrom there okay step three is an obvious one but we needto learn about the fund most people have no freaking clue what they're actuallyinvested in and it doesn't make sense to me but they don't even they're justblindly investing and hoping that works out well we can't do that guys we cannotget ahead financially or anything else in life unless we are truly intentionalwe can't be slacking off at this you can usually learn the most about the fundsin your 401k providers website you can log into your online 401k account andread about the funds you can see what companies the each of these funds holdis if you don't know about mutual funds mutual funds are made up of individualstocks so in a sense you are investing in individual stocks except it's all ina group we want to learn what doesn't each one made up is it mainly made uphealthcare stocks is it mainly made up of blue chips is it made up oftechnology stocks you guys get the idea so that's number three learn about thefunds as much as possible so that you actually know what your money's investedin number four use free resources for your research there are so many freeresources available to us online we have more access to free information than anyother generation in human history so a simple one would be that I use a lot isYahoo Finance because these mutual funds have ticker symbols just like a stock soyou can go to Yahoo Finance put in that ticker symbol and you can see a visualgraph of its stock performance it's like a stock chart basically and you'll seethat in a future video and I'll show you how I analyze that you can learn aboutthe more about the company our mutual fund from that vantage point you can seevisually visually how it does and good times and bad and see if you would wantto own it plus there's other information on YahooFinance that will be available about that fund and the great part is it'seasy to compare it to other funds on the same stock chart so I'll make sure toshow you guys that in a future video this one guys is pickinvestment after we realized hey what funds are available in our 401k planafter we've selected the criteria of what funds we're looking for or what wewant our funds to have after we've learned about the funds and after we'veused our free investment and resources to learn more about this and do ouranalysis and research now we're ready to invest if you're already invested greatno problem because after doing this process youmight find hey I don't want to be invested in this anymore so instead ofinvesting in this I'll invest in that so you can then move your money out of thatfund and put it in another fund or you can just stop putting your cash to thatfund you already had and just redirect that cash to the new fund that way youdon't have to sell off your original investment if you don't want to butwe're going to go into detail about that in the future and if you guys have neverinvested at all this is the perfect time to learn and not only do I do thisprocess for my 401k plan guys I use a similar process for my brokerage accountinvestments as well as my wife and I Roth IRAs so far it's been working forus guys and I think it can work for you so give it a shot in 2017 I just wantedto leave you guys with this it has never been more important to learn how toinvest then right now pensions are dead unless you work incertain government sectors you're basically not getting the pension inother words the company is no longer going to fund your retirementunfortunately you and I have to bear that burden now and that's just the wayit is that's the challenges our generation faces so we have to learn howto properly invest whether it's in our 401k whether it's a combination of our401k investments or something else but we just have to learn to becomeinvestors and like I said unfortunately school is not going to be teaching thisinformation anytime soon or ever I have no idea guys this is a great opportunityto take control of your investments your future and if you guys can get higherrates of return on your investment you can literally shave off years of your onyour retirement because your money will compound that much faster and sohopefully the idea is you won't have to work as hard or as long the rest of yourlifealright guys make sure to hit that like button if you have not already I wouldreally appreciate your support if you have any questions or comments make sureto leave them in the comment section down below I will definitely make sureto respond your homework for this week I'm giving you a homework what so bynext week what I would like you guys they have find out what your fun choicesare and make a list of all of your 401k investments that's your homework forthis week and that will get you started you can help us promote financialliteracy and career and life success skills by thinking of just one personwho you feel could benefit from this information and by sharing this videowith them you can share this video with them by hitting the share button on yourcomputer or by hitting the share button from your cell phone thank you for allthe love and support that you guys give me on this channel don't forget you canfollow us on Facebook and Twitter by hitting those address links over thereand if you're not already subscribed make sure to do so by hitting thesubscribe button down below or the subscribe button that is found below thevideo alright guys as always thank you so much for your support I love you Ican't wait to see you next week as we dive further into this process so thatwe may choose the best investments in our 401k plan I hope you guys will stickwith me on this I really think it's going to be worth your time what guessthat I've already gotten a 20% return for the first six months of this yearand I think you guys can get higher returns as well I'll see you all in thisweek's video peaceOh