Author Topic: Thoughts on Opening a Brokerage Account within 401k for Vanguard Funds  (Read 4256 times)

WetBandit

  • 5 O'Clock Shadow
  • *
  • Posts: 22
I am thinking about opening an Brokerage account within my 401k and move the funds once a year to Vanguard's low ER Total Stock Market Fund (VTSAX). This fund is heavily suggested by Jim Collins at jlcollinsnh blog (Very Good Reads!).

My 401k is through Fidelity and the 22 choice funds are terrible and all have high ER other then the index funds (S&P500 .05ER, Large Value .07ER, Medium Cap .16ER).

This was just a thought of mine and I wanted others takes on the subject....the amount as of now would be approx. 40k.

matchewed

  • Magnum Stache
  • ******
  • Posts: 4357
  • Location: CT
My 401k has a brokerage option as well. I'm unsure of the fees associated with this.

Could you perhaps lobby your HR department to include equivalent Spartan funds that Fidelity already has? That way you avoid the fees and include low coast index funds in your 401k's options.

WetBandit

  • 5 O'Clock Shadow
  • *
  • Posts: 22
I have not, actually...I thought about it a few weeks ago, but have since backed off as to not stir any feathers.... its terrible to have to feel that way.

I played around with it yesterday and it seems in regards to mutual funds that the only expense is a $75 transaction fee and any ER that the VG fund has.

I knew that most prob. have the BL Account option, but I was curious if someone has had experience with it... I don't care too much about being risky with my 401k in stocks or anything, but mutual funds seem appealing.... couldn't be any worse than my Fidelity choices =)

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5183
Some 401k plans offer a brokerage option, many do not.  There are usually fees and commissions if they do so.  Buying small amounts of Vanguard funds this way may be expensive.  It sounds like you have three of the Spartan Funds available to you at Fidelity.  These funds are every bit as good as their Vanguard equivalents.  If they don't offer a Spartan total market fund, then you can weight the three you mention to get most of the same exposure.  That's what I would do if I wanted a low cost index portfolio in the 401k.

WetBandit

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Another,

Thanks for chiming in. My plan has no Spartan funds just 10 Target Date Funds .53%, 3 Large Cap Funds (S&P .05%, Large Growth .07%, Large Value .07%), Bond Fund .24%, Stability Fund .18%, , Medium Cap Fund .16%, Small Cap .86% and company stock plan.

Currently, I am almost all in the Large Value Fund since I am young, it has one of the lowest ER at .07% and has a history of doing better then the S&P although they are very similar.

My thought was that most of my ROTH IRA is in the Total Stock Market Index at VG (VTSAX) with an ER of .05%. Were not talking about much difference on the ER (.07 vs .05), but VTSAX owns over 3000+ stocks all in Small-Medium-Large Value companies so a little more diversification. Not a huge deal, just a train of thought and wanting to hear others opinions, but it may be more trouble than its worth. I looked again and the only cost is amount of exchange + $75 Fee so of course you would not want to do this often.

matchewed

  • Magnum Stache
  • ******
  • Posts: 4357
  • Location: CT
I'd still lobby HR. It really doesn't take much other than asking, or asking around finding the more investment savvy members of your company have going in as a group. Paying 75$ fees is kinda silly if you don't have to.

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5183
The expense ratios on the three large cap and the medium cap funds look similar to the Spartan Funds.  I would probably make choices among these funds.  You are contributing with every pay check and the alternative would be to save up in the cash or stable value fund if you have one until it made sense to spend $75 to buy a Vanguard fund.

Fidelity does a very good job overall with their funds and in your shoes I would keep it simple and use those funds.  If you want exposure to the other market capitalization slices, put those funds in the IRA.

WetBandit

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Thanks, I appreciate that info! I like things simple, so I may just leave it be.

One more question that I have...

I have my 401k and ROTH IRA set-up... I hear / see posts from others that say they have a lot of money to invest and after maxing out these accounts (401k and ROTH) they are stashing it elsewhere....is this just a regular taxable account where people are buying mutual funds, stocks, etc?

matchewed

  • Magnum Stache
  • ******
  • Posts: 4357
  • Location: CT
Pretty much unless you have the availability for an HSA.

WetBandit

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Thankfully, I do. Would you advise maxing an HSA out or just to meet company match?

What are your thoughts on maxing out a 401k? Or just contribute to the company match?

matchewed

  • Magnum Stache
  • ******
  • Posts: 4357
  • Location: CT
Max and max.

It's been proven that saving in tax advantaged accounts is a superior method to achieving FIRE (given you make a plan, review the plan, understand how you will access all this money when hitting FIRE).