You’ll often hear “there’s no free lunch” in investing. This simply means that with every investment there’s a degree of risk.
But there are some financial moves investors can make that are virtual no-brainers. These are simple ways to generate a high probability of returns with limited downside. And in the recent bear market, all investors should be looking for ways to control the amount of risk to which they are exposing themselves.
Here are three ways you can do that.
Take advantage of employer 401(k) matches
The words “free money” sound too good to be true, but that is essentially what you get when you invest in a 401(k) with an employer match. If you’re lucky enough to have an employer that does this, it would be (lowercase f) foolish not to take advantage of it.
An employer match is a benefit through which the company you work for matches your 401(k) contributions up to a certain percentage of your compensation. For example, many employers will match your contributions dollar for dollar up to 6% of your salary. This means if you have a salary of $60,000 and you contribute at least $3,600 annually, your employer will add an additional $3,600 to your savings.
This is as close as it gets to a free lunch. While most financial advisors would recommend saving much more than 6% in your 401(k), you should at the very least contribute up to the match limit to take advantage of this free money. By doing so, you’re getting an immediate 100% return on your investment.
It should be noted that many companies have vesting periods during which the money does not technically belong to you until you’ve worked at the company for a minimum amount of time. If you’re in the market for a job change, it would be prudent to look into any potential vesting requirements before leaving your current job, as you could be losing retirement savings.
According to FINRA, Americans leave nearly $24 billion in 401(k) matches on the table each year. This equates to about 1 in 4…
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