A. Many firms' 401K investment options are very limited - with a dozen or so funds to choose from. But for the lucky ones, you could expand your 401(k) accounts' investment options easily and significantly. Here is what you could do -
Check your company's HR and ask if your firm's 401(k) account offers a "brokerage window", which is a self-directed account that you could access through a major brokerage firm such as Fidelity, Charles Schwab or TD Ameritrade. Through such an account, you could access to hundreds or even thousands of stocks and funds.
The Drawbacks
- There is a typically $25 - $75 annual fee in order to access the brokerage window.
- Some employers set limits on what percentage of a participant's investment can be invested through the brokerage (typically 75% - 85%).
- You are on your own to invest, the funds available through the self-directed accounts are not vetted by your HR which has fiduciary duty to you.
- Funds available through the self-directed accounts tend to be more expensive.
- You will incur trading costs when buy and sell stocks/funds.
- Unlike individual investment accounts, you cannot short stocks or use leverage in your self-directed accounts.