You could have some, perhaps all your assets in a stock mutual fund when market conditions are favorable.
We want a mutual fund rather than basket of individual stocks because ...
So inside our opinion you need to trade stocks in another trading account and use mutual funds for the 401(k) and IRA.
Until recently, we suggested having a few of your cash in a little and mid funds because they were on the list of biggest gainers. At other times we suggest small large caps according to the market leaders. Often we just throw our money into an index fund.
This is really a fund that closely mirrors the movement of the entire market. If the DOW, NASDAQ and S&P 500 are increasing, so will your index fund, and vice versa.
However, your retirement plan can provide you a selection between two funds, an "Index Fund" and a "Total Market Fund." You need to understand the subtle differences between your funds prior to making your decision.
An Index Fund reflects the action in the S&P 500 while a complete Market Fund represents the Wilshire 5000 Index. The coverage within an Index Fund is broad because the S&P 500 includes nearly every stock that moves the marketplace. However the coverage of the full total Market Fund is even broader because the Wilshire 5000 includes ALL American companies, including many with international exposure. Therefore, the full total Market Fund is free from the chance of underperformance.
Don't enter a tizzy, though, if your account doesn't provide a Total Market Fund. The Index Fund is really a legitimate substitute as the S&P 500 represents about 75% of the marketplace capitalization of the Wilshire 5000. The returns on both fund types are really close. Both have low expenses, plus tax efficiency as the annual distributions are minimal.