Where Can I Invest in a 403(b) Account?

Employer-Based

• When working for a non-profit or governmental agency, this limits your 403(b) plan choices to what your employer provides. The best way to get started is to contact the human resources department where you work and ask for literature about the plan and the investment choices. Some 403(b) plans provide a wide range of investment options, while others provide a more limited selection to employees.
  
  

Stock Mutual Funds

• Many 403(b) plans include several stock mutual fund options, and employees should examine their choices carefully. Ask for a prospectus for every fund, and review the performance and the expense ratios associated with each. If you have access to an index fund, you might find it has performed better than its managed counterparts for a lower cost. A study published on CNN Money found the same thing, as have many similar studies comparing the performance of managed and unmanaged mutual funds.
  
  

Bond Mutual Funds

• Investors often consider bond mutual funds lower risk than their stock counterparts. However, would-be bond investors should understand the risk involved with these investments before diving in. Bonds can be very sensitive to the direction of interest rates, and the net asset value of a bond fund generally declines when interest rates rise. If interest rates are very low when you invest, it is a good idea to check the average duration of the fund as listed in the prospectus. A short average duration, in the neighborhood of one to two years, can reduce your interest rate risk while helping you capture the available returns.
  
  

Stable Value Funds

• Stable value funds are the equivalent of money market funds in that they attempt to maintain a stable share price with no risk of loss. However, while stable value funds are a safe way to invest your 403(b) funds, the low returns they provide could mean that your money loses purchasing power over time. You might want to keep some of your money in a stable value fund, especially if you feel the stock and bond market is overvalued. Keeping your money in such a fund long term, however, could greatly reduce your chances of building the nest egg you will need in retirement.