7 Important Lessons Every 401(k) Millionaire Can Teach You

They diversify their investments

Putting all of your money into one or two stocks might help you get rich overnight. Of course, it’s just as possible that you will lose everything. Just ask Enron employees who parked all of their retirement money in company stock before the firm went bust.

Because the risk is so great, it’s safer to skip buying one or two individual stocks and instead park your money in well-diversified mutual funds. Buy a mutual fund that tracks the S&P 500, and you instantly will own shares in hundreds of companies. If one of those firms goes broke, you will hardly feel it.

The Fidelity study points out that 98 percent of companies offer target date funds, which offer diversification and lower risk as employees near retirement. As a result of this trend, Fidelity says, “employee asset allocation has improved greatly over the last 10 years.”

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