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One of the biggest mistakes that investors make is in deciding to use the 401K to meet expenses. Unless you're in real trouble and there's a guy waiting to break your legs unless you come up with the cash, using your 401K funds for paying off debt usually costs more than it saves. You'll pay 10% off the top, and then another 30-40% in state and federal taxes, leaving you with only half your money. Plus, you've lost the potential income—over 15 years, $10,000 more than quadruples at only 10% interest. So, if you need to pay off your credit cards, don't ravage your 401K: cut down on the monthly payments you're making now to your retirement fund and allocate the money to pay off your cards.
When you're just starting out, you'll want to know which funds your plan covers. Get a prospectus for each, or just go online to a reputable site and look at the fund's performance over time. You can find charts that will show you the ups and downs of a fund's share price: look at them for the past ten years or more. Daily charts aren't much help in evaluating a fund's performance. You want to see steady growth over a long period of time.
If you're a highly nervous investor, go with low risk investing, such as government bonds. They don't earn as much interest, but they won't disappear, either. An index mutual fund, which is based on proportionate shares of stocks from the companies in a particular index, is a nice, middle-of-the-road investment strategy for investors who can tolerate a little risk but still want to play it safe. Aggressive growth fund are for wild things who want to see their money grow and don't mind taking a chance on it.
Whenever you invest, you should be thinking about your tolerance for risk and the amount of time you have until retirement. In general, a tailored or "lifestyle" portfolio assigns more risk in a diversified portfolio for a younger person, becoming more conservative with the passing decades. But it's up to you: if you don't stay awake at night worrying about your investments, you may want to take more risk.
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