Four tips to better retirement plan choices

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Success with your retirement plan depends on discipline and following a scientifically designed portfolio. It is the process that matters not the funds.

Consider your whole portfolio. It’s natural to mentally segregate our investment accounts and assign a purpose to each one of them. You might say your 401(k) planis only for retirement and so it should be invested for the long-term. This is relatively straightforward if your 401(k) is your only significant asset.If you have other investments, you need to consider them as well when devising an appropriate strategy. For example, it could be that it makes sense to concentrate your 401(k) in more conservative bonds for tax reasons.

Low costs predict success. One of the strongest, more reliable predictors of an investment’s success is its cost structure. This is one area of your life that you don’t get what you pay for. The higher your investment fees are, the more likely it is that you will achieve subpar returns.

Hopefully you can easily determine the fees associated with each investment account. If not you may need to compare the returns of investment options against a relevant index, such as the widely used S&P 500, to approximate the investment fees.

Avoid company stock. You’re already invested in your company. After all, you work there! Your future cash flow in the form of income is dependent in part on the future of your company. You wouldn’t want to see your company suffer through a downturn, have your investment holdings tank, and then find yourself as the British say being “made redundant.”

Watch portfolio turnover. The turnover of a portfolio is expressed as an annualized percentage and relates to the stability of a fund’s investment holdings. A fund with 100 percent annual turnover replaces its entire portfolio on average once per year.

These tips are so important they warrant repeating.

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