Do most 401k plans allow participants to invest in individual stocks? Do most 401k plans allow the participant to invest in the mutual funds of his or her choice?
You would be able to purchase whatever investment offerings the 401k plan offers. In most cases, you would be limited to various mutual funds. It’s always suggested to diversify your portfolio as much as possible.
A 401k is handled by a third-party investment firm. However, you could take the responsibility of selecting your investments from the menu of investments offered by the 401k investment firm. Now 401k participants, rather than their employer, can take responsibility for the success of their investments and you can choose whether you want to invest aggressively or conservatively.
Whether you can choose individual stocks instead of picking mutual funds will depend on the type of 401k plan that the employer sets up and whether than plan allows for investing in individual stocks. In some cases, you may be limited to what individual stocks can be picked in the plan. The primary investment vehicle is usually mutual funds.
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