A couple of months into the New Year is the time for your 401(k) administrator to begin holding meetings about your company’s retirement options. Most of the old hands will automatically sign up again without giving a thought to determining if their funds from last year still meet their needs today. Yet many of those portfolios are in dire need of a refresh. I’ll address the need to actively pursue those changes in a column coming soon.

Today, I want to talk to never-before or new investors who may find themselves facing a stack of prospectuses without knowing where to begin their journey down the path of successful investing.

First of all, don’t panic! Your 401(k) plan will generally include a selection of mutual funds (not too many offer ETFs just yet), as well as total portfolio options for investors looking to avoid picking individual funds. These offerings will probably include:

• Growth funds that invest primarily in the equities of companies with rapidly growing earnings, generally trading at higher price-to-earnings ratios. These funds can be fairly volatile.
• Bond funds that seek current income by investing in corporate and government securities or municipal bonds.
• Balanced funds that focus on long-term growth and preservation of capital, as well as income. They tend to hold bonds, common stocks, preferred stocks and short-term securities.

There are also several combinations of the above funds that may be offered, and they may be divided into aggressive, moderate and conservative risk.

As a newbie investor, you are most likely under age 40, so you can afford to be much more aggressive than your older co-workers. Consequently, I would recommend that you put the majority of your investment monies into growth funds.

Within each portfolio choice, you will find several funds that your plan administrator has chosen for you. And since each 401(k) plan differs as to which funds will be offered, you’ll need to do some research to determine which fund or portfolio plan works best for you.

I have researched several growth funds and found some highly-rated options with good returns for the past three years, that may just fit your needs. While these particular funds may or may not be on the list of investments offered to you, you can go to www.morningstar.com and find similar ones that may be included your 401k plan.

I chose the funds based on no-loads, low expense ratios (less than 1%) ratings (4 or 5 stars), and year-to-date and 3-year returns (greater than the S&P500). Here are my results:

While I highly recommend that you also include some funds with moderate and conservative risk strategies, for most of you, the majority of your investment dollars should be devoted to more aggressive strategies, such as growth funds. That way, their higher returns, combined with the many years you have left to contribute, will multiply your retirement dollars at a much faster pace than their more conservative peers.

I’ll leave you with just one example of $200 invested monthly in your 401(k) plan for 30 years:

• An investment with an annual return of 15% would be worth $1,384,655.92
• An investment with an annual return of 10% would be worth $452,097.58
• An investment with an annual return of 3.08% (the equivalent of a 30-year Treasury bond) would be worth $118,158.47

You must understand that just because one of the above funds is doing well today, returning double-digit gains, it doesn’t mean that it will make those returns each and every year. After all, this is the stock market!

But if you monitor and reallocate your portfolio as needed, you can see that being more aggressive in your younger years can make a tremendous difference in the monies you will have accumulated by retirement. So don’t wait — and don’t ignore your 401(k) plan. Most of your employers will match at least part of your investment, and that means the figures above will be even greater. Get started now!