401-K;What happens to my contributions?.?
more money to it each pay period.Over time,the fund price
appreciates to $15 per share.Are contributions used to buy
shares at $15 every pay period or do they just get put into
my account and just sit there?
Answer:
You buy shares at their current market price when the contributions are made to the account. They can't "hold" a price for you throughout the year.
It generally depends how your 401K plan is set up. However, as a general rule, if your contributions are immediately put into the plan, the fund buys share at the current market price of that day. Each time, you make another contribution, the fund then buys more shares based on your desired allocation at the market price of the shares.
When you enroll into a 401k, you split your money into several investments - into an investment portfolio. You will generally have it split between mix of fast growth(higher risk), slow growth(lower risk but lower return), capitol preservation and mutual funds. Your contributions are split among these options at the percentage of each you have allocated. The items are purchased at the current rate the for day that it is purchased. Growth is based on the performance of stocks and bonds the options are based upon.
All these answers are generally true remember however to never contribute more money than what is matched because the restrictions on 401-k's are so great that you would be much better off to place additional money elsewhere.
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