The first thing to do is look at your 401(k) in the context of all your assets, advisors say. If you also own, say, an individual retirement account or taxable accounts—savings or stock accounts—make sure the asset allocation in your 401(k) reflects your overall holdings so you are not too heavily invested in any one market sector or lack exposure to stocks.
Also consider your risk tolerance. That is, determine to what degree you can tolerate large swings in the value of your investments due to market volatility. People who misjudge their risk tolerance might panic during a market drop and unload investments, which advisors say is unwise.
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Regardless of whether you have 100 percent of your 401(k) in stocks or you have, say, 70 percent in stocks and 30 percent in fixed income such as cash or bonds, Snider said his firm generally approaches the stock—or equity—portion the same.
The tricky thing for advisors is that when it comes to a 401(k), the ideal allocation for clients is only possible to the extent that the plan allows it.