The best strategy for selecting mutual funds in the 401(k)plan is to
A)pick an index fund.
B)pick an aggressive growth fund,using last year's performance as a guide.
C)select a number of funds to achieve broad diversification.
D)pick a money market fund to avoid risk.

Question

Quizplus · Accepted Answer

The best strategy for selecting mutual funds in a 401(k) plan is to select a number of funds to achieve broad diversification. This allows for spreading risk across multiple asset classes and investment styles. Picking just one index fund or an aggressive growth fund based on last year's performance may not provide adequate diversification and could expose the investor to unnecessary risk. Choosing a money market fund would provide very low risk but also very low returns, which may not be sufficient for long-term retirement savings goals.

The Best Strategy for Selecting Mutual Funds in the 401(k)plan