You have a 401k plan and don’t know how to invest in it. Don’t feel bad, few people know how to invest, even though they know they need to invest to get ahead. Here’s your starter guide and a simple investment strategy that will work for you year in and year out.Two major financial hazards face working Americans today: health insurance, and the fact that the public does not know how to invest. I can’t help you with the first problem area; but here’s how to start investing with a simple investment strategy that has worked for investors in the past. Your goal as a clueless investor should be to make good returns with only moderate risk in your 401k or other retirement plan. This simple investment strategy is designed to do just that over the long term.If your plan is typical, the vast majority of your investment options are mutual funds. From safest to highest risk (and profit potential) they will fall into four different categories: money market, bond, balanced, and stock funds. A money market fund is safe and pays interest. Bond funds pay higher interest, but fluctuate in value, giving them moderate risk. Stocks funds fluctuate even more in value, so they are the riskiest; but have high profit potential (growth). The other investment options, balanced funds, invest in both stocks and bonds and will not be part of our simple investment strategy.Your job is to decide where your plan contributions go each pay period. That’s called asset allocation, and it is your #1 consideration. Here’s how to invest in the various investment options, using a simple 2-step investment strategy. First, set your asset allocation up so that half of your contributions each pay period go the money market fund… or STABLE ACCOUNT if your plan has one and it pays higher interest rates. The other half gets split evenly between a bond fund and a stock fund. Pick a bond fund that is described in the plan literature as an INTERMEDIATE-TERM HIGH QUALITY BOND FUND. Pick a stock fund that is a LARGE-CAP DIVERSIFIED STOCK FUND.Now you have your asset allocation set up for all contributions going into your plan… 50% safe… 25% bond fund… 25% stock fund. Here’s step two of our investment strategy. You want the money, as it accumulates in your plan, to be allocated the same way as above: 50%, 25%, 25%. If you already have money in your plan, move it to the above investment options and percentages. From here on out, step two of our investment strategy requires your attention once a year.Every year, review the asset allocation for the money that is invested in your plan. It will change over time, because the three different investment options will all perform differently. For example, if stocks have a good year you might see that your stock fund represents 55% or 60% of your total investment value. Since we want to maintain our original asset allocation, it’s time to make a change… back to 50%… 25%… 25%. This requires that you move money around to make it so. In other words, it’s time to rebalance your portfolio, once a year to keep things in line.Some plans offer an AUTOMATIC REBALANCE feature that will automatically do this for you. If yours does, take advantage of it. If you use this simple investment strategy you don’t need to worry about the stock market or interest rates. You won’t get caught with a high percentage of your money in stocks when the market takes a big hit like it did in 2008. The reason it simple.As stocks go higher and higher, you are systematically taking some money out of stocks and placing it in safer investments by rebalancing. On the other hand, as stocks get cheaper you are automatically forcing yourself to invest more in them by rebalancing. Investors in 401k plans took huge losses in 2000-2002 and again in 2008. They didn’t know how to invest; and most did not have a sound investment strategy.You can’t afford to avoid the risk of stock investing, because that’s where the profit potential is. Now that you know how to invest with an investment strategy you can start investing with confidence AND less risk. Just don’t forget to rebalance once a year.

A safe investment can be defined as an investment that yields good returns in a low risk. Almost everyone invests money to secure themselves financially through investments such as real estate property, stocks and bonds.Before you invest your money, you must understand thoroughly the intricacies of making an investment. Here are the three main factors that determine the difference between a safe and an un-safe investment:Diversified portfolio: A diversified portfolio is at lesser risk than an un-diversified one, because your investments are spread out. So, even if one market is not doing well, your other investment may still make you money. A diversified investment portfolio works by acting as a shock absorber when the market falls. You must not keep all your eggs in one basket if you want to invest safely your money.Risk: The amount of risk you take while making an investment is dubbed as your risk appetite. It is said that higher the risk, greater are your chances of getting a higher return.Time span: This refers to the duration of time for which you make an investment. The safety of your investment is dependent upon several variables such as fluctuation of the market, liabilities and more. You must keep in mind your personal needs for making the investment. You can have a short, medium or long-term investment depending on the above-mentioned factors.Most investors use below given formula to calculate how to make a safe investment:100 – Age of the investorFor instance, if the age of the investor is 40, he should invest 60% (100-40) of his total investment amount in equities and the rest 40% in government securities.All investment options carry certain inherent risk factors. Thus, a study of all investment options is crucial to safely invest your hard earned money.Financial toolsDeposits: Deposits are a safe investment option, but they offer very small returns. Deposits include government bonds and fixed deposits.Mutual Growth: In a mutual fund, professional people manage your money. The risk is low as your investment is diversified.Bonds: Buying a bond is similar to lending money to an organization. You earn interest on that amount.Equities: An equity is a long-term safe investment option that offers considerably higher returns than other safe investment options.Non-financial toolsGold: When the stock markets go down, the price of gold goes up.Real Estate: The real estate market is a profitable, but unpredictable investment option.You can also consult an analyst or a wealth manager to help you make a safe investment. Thus, weighing all the pros and cons of investing in specific sector.There are many more aspects on building a safe investment, and managing it throughout market fluctuations and differing scenarios, both global and personal (aging, marital status, number of kids), and for that you will need to spend some additional time in educating yourself and making sure you take the right decisions.