Getting your first job is very exciting. You are going to be earning a salary for the first time, with lots and lots of temptations around you, from new furniture for your apartment to nights out at restaurants and bars. What you want to do instead of blowing all that extra cash is start to invest for retirement. That is where the 401K comes in.
You need to start saving money as soon as you enter the workforce. Saving for a rainy day is important, but so is saving for retirement. That is where the 401K comes in. As a tool for young workers to start to take advantage of compound interest, the 401K is vitally important. It is also a way to automate your savings and not get caught up in trying to alter your budget every month in order to meet your savings goals.
A 401K is a great way to start saving because you can do it right through your job. And, if you have a good job, the company may match your percentage of savings up to a point. That is free money. Specifically tax free money. That means more money going into your investment account and getting the chance to grow at 8% over the next 45 years. There is no substitute for starting early. And the 401K bonus is that you can get your employer to kick in some extra cash on top of your salary. Which is a better deal than a traditional IRA or a Roth IRA.
Traditional IRAs are a possibility too, depending our your income level and tax situation. A Roth IRA offers different tax benefits. With traditional IRAs, contributions are tax deductible, so you can get some money off your bill every April 15. With Roth IRAs you cannot deduct the current contributions from your taxes, but when you are 59 and a half you can start taking distributions from the account, tax-free. That is pretty great when you are getting ready to retire.
But the 401K is a very good option for workers that work at companies that offer those plans. If you are eligible for a 401K, it makes too much sense to take it and take the match. Free money is always something to take.
For those that are more adventurous, you can manage your own 401K account, by taking control and moving money around to the investments that you see fit. Managed 401K accounts can drain you with fees or just place your money is pretty boring, safe index funds that will grow, but not at the rate you want. If you are ready and willing to take on some investment education, you can start to pick stocks and other vehicles to put your 401K money into.
As for day trading, it is very hard to do that with 401K money. Most plans put restrictions based on how many trades you can make in a particular account. That is best left for extra money. When you first start day trading, you want to be very sure that you can lose that money. That is how to learn how to day trade. By getting out into the market and looking for ways to make money off the volatility. Even if you need to spend time at a day trading education site, you can make some serious profits as a day trader. And then supplement that 401K money in retirement.