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While most companies don't let you invest your 401(k) in individual stocks, there are some that do. Learn more about it here.

Can You Invest Your 401(k) in Individual Stocks?

Posted on by Jenni

According to CNBC, 36 percent of Americans don’t think they’ll ever have enough money to retire. So if you’ve got a 401k through your employer and you’re making regular pre or post-tax contributions each month, you’re in great shape financially.

But as a working professional with a standard 401k and a talent for spotting amazing stocks, you might be wondering how much control over your retirement fund you really have.

Can you purchase individual stocks through your 401k? Can you use those funds to buy shares in Amazon or Disney? Read on to find out the answers to these questions and more.

How Do 401k Investments Work?

In most workplaces, 401k retirement funds start with the company choosing a brokerage firm or investment bank that has a rock-solid reputation. Employees will set aside a portion of their paychecks each month and in some workplaces, employers will match contributions. Then, once the funds are received, the broker will buy stocks and bonds with the goal of making sure that everyone has the means to retire comfortably.

At this stage, you’ll typically have at least two choices:

  • How much money you’ll want to contribute
  • How much risk you’re willing to take

So the short answer to the question, “Can you invest in specific stocks with a 401k?” is “No.”. However, that isn’t the end of the story.

Understanding Your Investment Choices

Even if you’ve got a traditional 401k, you have more control over your investments than you might think. Some of the options at your disposal include:

  • Making ETF selections where possible
  • Figuring out your risk tolerance level
  • Taking out a self-directed 401k
  • Opening a separate investment account

If you pursue the latter two approaches, you have the final say over your investments. You can purchase ten company stocks or one. And as you figure out your post-retirement steps, you can visit a 401k retirement blog, collect retirement brochures, or speak to a financial professional.

The final choice is yours.

Investment Tips

Whether you’re taking out a 401k or creating a personal investment account, it’s easy to lose money while trying your hand at investing. The stock market can be a roller coaster and investing in the wrong companies could leave you with a smaller nest egg than you deserve.

A few tips to keep in mind with your investments include:

  • Diversify your portfolio
  • Research your stocks
  • Don’t panic sell
  • Avoid investing money that you’ll likely need in the short-term
  • Have a list of personal rules that will dictate your buys and sells

In many ways, profitable investing comes down to due diligence. At your job, you likely wouldn’t take on a major project without figuring out the scope of the work. Learning how to invest works largely the same way.

Should You Buy Individual Stocks?

If you’ve got a traditional 401k, you may not be able to make direct purchases. But if you want to buy individual stocks, you do have multiple investing options available to you. All you have to do is open an account, choose your stocks, compare different investing services Motley Fool vs Morningstar, and watch your portfolio grow.

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My name is Jenni, and I am a Commercial Real Estate Manager for several of the biggest companies in the Bay Area. I’m a mother of three, dog mom of two, and working wife and life partner of my one and only.

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