Stay the Course With Your 401K Plan

401 (k) retirement plan participants fare better

While the recession helped shrink many individuals' investments, some retirement plan investors fared better than other investors. The Employee Benefit Research Institute's analysis of Federal Reserve data- found that the median 401 (k) account lost 16.4% from the end of 2007 through June 19,2009. In comparison, the Standard Et Poor's 500 Index fell 37.69% from January 4, 2008, through June 19,2009.- That's more than double the median 401 (k) account loss. This index measures the stock performance of the 500 largest companies in the U.s.

Three ways to potentially grow your balance

Why did retirement plan participants do better on average? First, they likely kept contributing, even while the stock market declined. Buying shares in stock mutual funds when their prices were down helped them when the market rebounded last spring. Second, some participants likely used automatic asset allocation- tools offered by their company plans. These tools help plan participants adjust their portfolios whether investments increase or decrease in value. Third, they simply may have continued to follow a long term strategy. This last point is worth repeating. Investing for the long term is a sound  approach to take when you are years away from your retirement goals.

* Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won't guarantee future results. An investment in mutual funds may result in the loss of principal. Mutual funds involve risk and are offered by prospectus only, which you can get from your registered representative. Carefully consider investment objectives, risks, charges and expenses of the investment company before investing. The prospectus will include this and other information; read it carefully before investing. Investing involves risks and there is no guarantee that anyone strategy protects against a loss in a declining market. You should consult with your financial professional regarding your particular situation.

- EBRI Issues Brief, August 4, 2009, No. 333, Downturn Cut Median Retirement Account Balances by at Least 15 Percent

- AOL Money and Finance stock calculator, taken 10/1/09

-- Asset allocation won't guarantee a profit or ensure against a loss but may help reduce volatility in your portfolio.