You can find out your 401(k) funds' fees through your plan administrator, or through the funds themselves. Many 401(k) plans get lower-cost shares than those sold directly to the public. If you do have some high-cost clunkers, however, your only avenue is to complain to your company management.
Taking small risks
The bulk of your long-term retirement funds should be in broadly diversified funds, such as those that track the S&P 500 or the Russell 3000. But taking a small position — no more than 10% of your portfolio — in a more specialized fund can make investing more interesting.
Normally, investing in downtrodden funds is simply a way to get mediocre returns. Bad returns, like good returns, can last longer than you think. But at the bottom of a bear market, it can pay to invest in the sectors that have been most beaten up in the previous 12 months, says Sam Stovall, chief market strategist for Standard & Poor's.
Stovall looked at the past 10 bear markets, and found that investing in the 10 most beaten-up industries resulted in an average gain of 57%, vs. 36% for the S&P 500.
Assuming that the stock market did indeed bottom in November, the 10 worst industries were aluminum, automakers, casinos and gambling, consumer electronics, diversified metals and mining, industrial real estate investment trusts, investment banking and brokerage, multiline insurance, thrifts and mortgage finance, and tires and rubber. Your 401(k) plan might not offer such specialized funds, but many companies that offer individual retirement accounts do.
Although you won't find a tires-and-rubber fund — yet — you can find funds that specialize in commodities, technology, metals and mining, and several that specialize in financial services.
But use these funds as spices, not as the main course. The most important decision is what portion of your portfolio should be in stocks. Dropping out of the stock market entirely could be a big mistake. "Charlie Brown once said, 'I have a feeling that when my ship comes in, I'll be at the airport,' " says Stovall. If you want to make up for your losses in 2008, don't be at the airport, Stovall says.
TELL US: What do you plan to do with your portfolio? What worked and didn't work for you last year?