Related: Ramping up retirement: 5 ways to increase employee participation and contributions

When talking about investing for the long term, the stock market is usually part of the story. It might be the main attraction. Your professor might use an Ibbotson chart showing the returns of different asset classes over decades. Here are several highlights they should hit.

The stock market isn't the only option. Some employees might think investing in the stock market means going "all in." Every dollar in their retirement account is invested in stocks! Generally speaking, investors split their money among stocks, bonds and cash. This is called asset allocation.
Risk tolerance is different depending on who you are. The stock market isn't for everyone. Some employees are scared of losing money. They do not want to take any risks. Other employees are thrilled with online casino gambling. They take risks. There are usually several asset allocation models comprised of stock, bonds and cash. There should be one that matches the employee's temperament.
You don't need to pick your own stocks. The employee who is afraid of the stock market might feel that way because they think picking individual stocks is very confusing. The New York Stock Exchange had 2,578 listed companies in 2022. NASDAQ has 3,788. How can an ordinary person know which ones to pick? Fortunately, company retirement plans tend to make this easy. Let us assume the appropriate asset allocation model aligned to your risk tolerance says 40% of your money should be in the stock market. You can choose a fund that tracks a major stock market index, like the S&P 500. These are called tracker funds or index funds. Generally speaking, the performance of the index over time is the performance you get too.
You don't need to obsess about when to buy and sell. What if the stock market isn't doing well? The employee might be happy riding it up, but not want to ride it down. You can sell investments within your retirement account, based on the rules your firm has with the benefits provider that operates the retirement account program. Another alternative is to outsource the buy and sell decisions within a fund to a money manager. Many of the funds your firm offers as investment choices are in a mutual fund format. The fund owns lots of stock, but professional managers at fund HQ are making the decisions about what to sell and what to buy on a regular basis. Suppose you don't want to be bothered with thinking about it? One of those fund managers likely is organized as an entire portfolio. Some money is in cash, other money is in bonds and the third part is in stocks. They look after all three segments.
Get good advice. A defined contribution plan puts the employee in charge of planning for their own retirement, but they are not necessarily alone. The benefits plan provider and the firm should have educational material they can access. There should be a toll-free number they can call to speak with a live person. This can help, but as an employee builds wealth, they should also find a qualified financial advisor who can help them manage it. Financial advisors at major firms get to know their client by asking questions and gathering data. Advisors operate under many rules including to Know Your Client (KYC). This involves many aspects of the relationship including a client's tolerance for risk. No one wants to lose money, but putting your money in your mattress because you don't want to take any risk also delivers the lowest return. Money in your mattress earns no interest and its purchasing power declines over time because of inflation. Advisors can help clients get comfortable with investing and focus on the long term.

Getting the right respected people in front of your employees can help win them over in both taking advantage of company retirement plans and getting into the stock market.

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401(k) asset allocation: Educating employees about choosing the right stocks in 2023

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