Map out an overall asset allocation strategy
Before you can take the step of diversifying each 401(k) portfolio, you need to know what you're trying to accomplish. Asset allocation is the practice of investing among various asset classes -- stocks, bonds, cash, commodities and other types of investments. Investing in assets that are not correlated to one another helps mitigate risk.
To determine an asset allocation plan that reflects your retirement goals and objectives, consider factors such as the time horizon until retirement, your risk tolerance and overall financial goals, says Ryan Franklin, a senior financial adviser with Moss Adams Wealth Advisors in Seattle.
If you have more than 10 years before retirement, you may be comfortable with a higher allocation to stocks rather than bonds and commodities, say experts. If you're nearing retirement, your accounts will be tapped soon, so you may want to preserve capital by choosing conservative investments.
Be careful to limit the overall portion of company stock in 401(k) plans, cautions Brad Bofford, a financial adviser with Financial Principles in Fairfield, N.J.
A large allocation to company stock exposes you to high risk.