401(k) repair kit

Your conundrum:
Enrolling in a plan isn't enough. Now is the time to start paying attention to how your money is being invested.

Shocking fact:
Some 40% of all 401(k) participants make investing mistakes that impede their portfolios' growth, according to a survey by investment advisor Financial Engines. Some skew too conservatively (for instance, relying heavily on bonds), while others court excessive risk by investing too narrowly in a single stock or asset class.

Catch-up plan:
Learn to love asset allocation. Gail Buckner, a retirement expert at Franklin Templeton, recommends mutual funds that combine stocks and bonds, giving you instant diversification and a cushion against big market drops; you'll have a manager rebalancing as needed.

Pitfalls:
Taxes. If you worry they'll be higher by the time you retire - or if you expect to be in a higher income-tax bracket by then - you can limit your exposure by taking advantage of a Roth feature in your 401(k) in which you pay taxes upfront and your investments grow tax-free.

Bottom line:
Fine-tuning your 401(k) portfolio to the appropriate mix of risk and growth takes hard work and diligence. Start managing your investments early - or pick the right people to do it for you - so you can reap rewards down the line.

NEXT: Age: 40s