Plain Money ideas Plainmoney investing

Index funds in your 401k

I’m sometimes asked, “What should I hold in my 401k plan?” Of course, my answer is “index funds” — tilted more toward stock index funds if you’re young, bond index funds if you’re old. My book explains some simple rules of asset allocation.

But what if your employer’s 401k doesn’t have index funds? Two answers: (1) Invest in the most broadly diversified mutual funds you can choose from. They’ll perform about like index funds. (2) You may have increasing opportunities to invest in index funds. This article in the Wall Street Journal points out that more companies are insisting on having index funds available to their employees.