If you have a 401(k) retirement account, please consider this.

# **I saw a very common mistake so many of you are making with your 401(k) retirement account**<br><br>---<br><br>I am a financial advisor for a large financial firm, and I specialize in retirement planning.<br><br>We work with a lot of high net worth clients, typically in the $250,000 to $1.5 million range. I have many clients from my previous role at other financial firms, and most of them are entrepreneurs or high-income professionals.<br><br>When I onboard a new client, the first thing I do is go through all of their accounts (brokerage, IRA, 401(k), etc.) to get an idea of what they have, what they need, and identify any potential problems. Usually, it's a pretty standard process, but the other day, I saw something that really bothered me.<br><br>One of my clients, who is in their early 40s and makes a good living, had their entire 401(k) with Fidelity invested in one thing: the Fidelity 500 Index Fund (FXCIX). I asked them why they chose that specific fund, and they said it was the default option when they opened the account.<br><br>I was shocked. This person was essentially betting their entire retirement on a single stock market index.<br><br>I thought to myself, "What if the market crashes again like it did in 2008? This person's entire nest egg could evaporate."<br><br>So, I asked them about their risk tolerance and if they had any idea what would happen to their investments in the event of another market downturn. They had no idea.<br><br>I explained to them that while the Fidelity 500 Index Fund is a solid choice for most investors, it might not be the best choice for someone in their 40s who is thinking about retiring.<br><br>When I showed them how much they could lose in the event of another market crash, they were taken aback. More importantly, they were open to listening and learning.<br><br>That's when I realized that this issue is likely more common than I thought. Many people invest in their 401(k) without truly understanding the risks associated with their investments.<br><br># So, here's my advice to you:<br><br>**If you have a 401(k), please, for your own sake, DO NOT put your entire nest egg into a single stock market fund, no matter how broad it is.**<br><br>**Instead, diversify your portfolio with a mix of assets, such as bonds, real estate, and commodities.**<br><br>**Consider your risk tolerance and adjust your portfolio accordingly.**<br><br>I understand that this might seem like basic advice, but trust me when I say that it's incredibly important.<br><br>A well-diversified portfolio can help you weather market downturns and ensure that your nest egg is there for you when you need it.<br><br>It's your future; don't gamble with it.<br><br>**EDIT:**<br><br>Wow, this blew up. Thank you for the awards.<br><br>For those of you that are saying that I'm trying to scare people into managed accounts by exaggerating the risks of a 500 index fund, that's not my intention.<br><br>My goal is to make sure you understand your investments and the risks involved. I want you to be confident in your financial decisions.<br><br>I do not recommend managed accounts all the time. In fact, the majority of my clients are in index portfolios. However, they are diversified across multiple asset classes.<br><br>I apologize if my previous post came across as trying to scare you. I'm on your side and want the best for you.<br><br>Please let me know if you have any questions or concerns. I'm here to help.<br><br>**EDIT 2:**<br><br>Some of you are saying that the example I gave is not accurate because the client would only lose 30% in a crash, not 90%. However, if the stock market were to drop 70%, it would take a 233% increase to get back to the original value.