Author Topic: 401k Options  (Read 3577 times)

alm0stk00l

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401k Options
« on: February 20, 2014, 03:33:28 PM »
My 401k is about to kick in with my employer and I was hoping someone could help me choose a fund(or mix of funds) that makes sense. I have only ever invested with Vanguard, and, since they are not a choice, I am a little out of my depth. I would appreciate any advice and thanks in advance.

matchewed

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Re: 401k Options
« Reply #1 on: February 20, 2014, 03:38:12 PM »
How does these choices factor into your asset allocation? What are the fees on these choices?

KingCoin

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Re: 401k Options
« Reply #2 on: February 20, 2014, 03:39:57 PM »
Figure out your target asset allocation. Then choose the lowest cost fund in each category.

There's no getting around the leg work of going through each fund, figuring out the expense ratio and what kind of assets each holds.

If the expense ratio on the target date funds is reasonable, that's probably the easiest way to go for a simple set-it-and-forget-it option.

alm0stk00l

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Re: 401k Options
« Reply #3 on: February 20, 2014, 03:45:55 PM »
I am looking through all of the fees now, but I guess I was just hoping someone would have had experience with one of these. All of the fees seem high to me, around 1%, but as I mentioned, I only have experience with Vanguard funds. Is 1% a pretty standard rate throughout the industry?

matchewed

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Re: 401k Options
« Reply #4 on: February 20, 2014, 03:51:47 PM »
I am looking through all of the fees now, but I guess I was just hoping someone would have had experience with one of these. All of the fees seem high to me, around 1%, but as I mentioned, I only have experience with Vanguard funds. Is 1% a pretty standard rate throughout the industry?

For actively managed funds it is a bit over that (1.5% or so).

I should have been more clear in my post. I suggest answering the first question and then find the expense ratios of the funds which you answered the first question with.

I'm not a huge fan of actively managed funds, index funds generally will have lower costs. I'd go with the lesser of the evils if you can't find good expense ratios and then start lobbying your HR department for changes to the 401k to include low cost index funds.

alm0stk00l

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Re: 401k Options
« Reply #5 on: February 20, 2014, 03:58:01 PM »
Thanks for the advice. I have another question as I look through them. Some of them have something along the lines of:

Maximum Sales Charge (Load) Imposed on Purchases: 5.75%
Maximum Deferred Sales Charge (Load): None

Does that mean I have to pay every time shares are bought?

Another Reader

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Re: 401k Options
« Reply #6 on: February 20, 2014, 04:06:38 PM »
You have a number of index funds from Great West.  Check the expense ratio on those.  Some of the American Funds have decent performance.  As long as you are getting the class A shares without paying the load, a couple of those might be worth looking at.  Often the load is waived in these plans.  I have owned both of the Oakmark choices, but as the original I not version II.  Equity Income (the original) performed well during the 2008 crash.  I would look at those as well if they hold the same things as the original versions.

With marginal 401k offerings, I pick the best performing, least expensive funds.  I make up the remaining asset allocation in my other accounts.  No point in buying a garbage fund with a high expense ratio and poor performance just to have your 401k allocation match your overall asset allocation.


matchewed

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Re: 401k Options
« Reply #7 on: February 20, 2014, 04:08:41 PM »
Thanks for the advice. I have another question as I look through them. Some of them have something along the lines of:

Maximum Sales Charge (Load) Imposed on Purchases: 5.75%
Maximum Deferred Sales Charge (Load): None

Does that mean I have to pay every time shares are bought?


Yup. But as Another Reader states it could be waived for retirement accounts, you'll have to look into the plan documentation and prospectus more.

alm0stk00l

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Re: 401k Options
« Reply #8 on: February 20, 2014, 04:14:58 PM »
Why would anyone ever want to be in a load fund? I am having a hard time understanding how that could be a good choice. Faith in the fund manager?

Another Reader

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Re: 401k Options
« Reply #9 on: February 20, 2014, 04:17:43 PM »
Ignorance.  These funds are sold through "advisors."  Once the light goes on, most people bail.  Occasionally, someone feels so helpless they stay with their financial "advisor."  That explains the success of Ameriprise and Edward Jones.

matchewed

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Re: 401k Options
« Reply #10 on: February 20, 2014, 04:19:21 PM »
Why would anyone ever want to be in a load fund? I am having a hard time understanding how that could be a good choice. Faith in the fund manager?

/shrug

Not sure personally. People may have not been fully knowledgeable of the fund, there could have been some smooth talking going on without due diligence on behalf of the "customer" or investor, or they may have true faith (and I mean that with the full sense of the word, belief without evidence) that the fund manager will perform good enough that the various fees will be a drop in the bucket compared to the profits. The world and the people that inhabit it can be a strange place. There I go again waxing philosophically on investment topics.