I did not put money into 401K right after I started to work in Fall 2000. Looking back this is my biggest mistake in 401K. Although I have some credit card debt at that time, I think I should at least put the money to get the company’s maximum match (free money, hehe). Not to mention the tax deferred effect; and the potential compound effect of growth. My friend who studied finance told me a “compound” story like this: if one puts $ 5,000 when he/she is 20, it’s like someone put $50,000 when he/she is 40 (the number may not be exact, but you got the idea).
I started my 401K in year 2002, a little more than a year after working. I was not familar with the mutual funds initially. I walked to one of my colleagues who is a stock lover and he told me “put everything in stock funds” because “we are not going to use the money for a while, and stock gives better return”. But I did not go 100% stocks. I attended the company benifits semimar; I also read the Vanguard Mutual Funds prospectus and learned about the fund types (value, growth, index), and morning star rating system. I put about 70% in stock fund and 30% in bond fund: thought diversification is my best friend. Looking back now I would not put money in bond fund. Because I have plenty of time until the withdrawl from 401K. The ups and downs of stock market in short term does not mean too much to me, and ultimately the stocks will have better return than bonds.
In Spring 2004 I made another stupid mistake, at that time the stock market went down significantly, and I sold all the stock funds in a hurry and kept the money in cash. In July 2004 when the stock market bounced back and I bought the same mutual fund again, I got fewer shares of the original mutual funds.
Since then I have not done any “trade” in my 401K account. The only thing I change is the contribution (percentage of my salary) and allocation of funds. I have not done any re-balancing of funds either. In recent two years (2005, 2006) I increased my contribution, and allocate more to value and international funds. My portifolio has been doing well due to my careful selection of funds, and the hard work of Vanguard Fund managers. I hope my nest egg will continue to grow steadly in the future.