• Understand the risks of your 401kstock market analysis screenshot image by .shock from Fotolia.com
  
  Fidelity is one of the biggest holders of retirement assets, including rollover Individual Retirement Accounts, 401k plans and personal investment vehicles. While a Fidelity 401k plan can be an excellent way to grow your money and invest for the future, it is important for workers to understand the risks as well as the potential rewards.
  
  

Wrong Mix of Investments

• One of the most significant risks holders of Fidelity 401k plans face is that their mix of investments might not be appropriate for their age, risk tolerance and length of time before retirement. Fidelity representatives will often base their asset recommendations on a worker's age, with younger employees heavily tilted to aggressive assets like stocks and stock mutual funds and older ones leaning more toward bonds and other fixed income investments.
  
  This strategy can be a good one, but only for workers who plan to end their careers at the traditional retirement age. Younger workers with plans to retire at 50 or 55 might need to start taking a more conservative approach to investing when they enter their mid to late forties, while older workers who plan to work until 75 or 80 can afford to be a bit more aggressive well into their sixties. When talking to your Fidelity adviser, be sure he or she understands your plans for working and retirement.
  
  

Expensive Funds

• It is important for anyone with a 401k plan through Fidelity to check the prospectus for each fund and evaluate any fees before allocating any of their retirement money to the investment. Not all funds have the same fees. Ask your employer for a copy of the prospectus, or request one directly from Fidelity. Keeping your fees and expenses low can help you accumulate much more money over the long run.
  
  

Investment Risks

• It is important for every participant in a Fidelity 401k plan to understand the risks they are taking when investing in stock or bond funds. With stock funds there is always a risk that a bear market will hit just as the money is needed, so the best strategy is to slowly move to a 50/50 balance of stocks and fixed income investments as retirement approaches. Another way employees can gauge the risk of the funds they hold is to look up the beta coefficient for each fund in the prospectus. The beta coefficient is used to measure the volatility of a fund, with the stock market as a whole having a beta coefficient of 1. Any mutual fund with a beta higher than 1 will be more volatile than the market, while funds with a lower beta coefficient tend to be less volatile and less risky.