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Question of the Day – Investing
By JLP | October 24, 2006
Here’s today’s question of the day:
My response:
My wife’s company offers a 401(k) plan through Fidelity. We have 26 choices, 12 of which are Freedom Funds. And, yes, I’m pretty happy with choices. However, Fidelity offers something called BrokerageLink that allows plan participants to purchase other mutual funds and individual stocks, but my wife’s company won’t let us use it to buy individual stocks. I understand why they won’t allow employees to buy individual stocks, but I still think it would be cool to offer something and allow employees to invest a small portion (no more than 10% or so) in individual stocks.
Topics: Question of the Day | 9 Comments »
October 24th, 2006 at 12:35 pm
My company, unfortunately, does not offer a 401(k) or similar plan. It’s a smallish and fairly new company, and the workforce is extraordinarily young. I’m hoping that this changes in the near future.
October 24th, 2006 at 12:47 pm
My company offers a 403(b) with a choice of company: TIAA-CREF or American Century. I chose TIAA-CREF when I started, and there are 10 fund choices. At American Century, there are, um, more, I’m not sure, but from what I understand the choices aren’t as limited and the fund performances are better overall. I’ve asked about switching, but haven’t gotten a solid answer on how to go about doing that.
My husband’s 401(k) is with T. Rowe Price, where he can choose among 16 funds, 5 of which are target retirement funds. We decided to just go with the Retirement 2040 Fund which should be fine for now.
October 24th, 2006 at 1:14 pm
My company has it’s 401k offerings through Nationwide and I’m very pleased. They offer 16 primary funds with the option of going outside that selection and pretty much rolling your own. It’s nice for catering to both those who just want someone to tell them what to invest in and leave it alone, as well as those who really like to dig in and figure out their own strategy.
October 24th, 2006 at 2:15 pm
My wife and I are in the Federal equivalent to the 401k called the Thrift Savings Plan. It has five funds and five “lifecycle” funds which are combinations of the five funds that change their porportions according to a projected retirement date. I think that there are enough choices in funds. All the funds are stock or bond index funds or government securities with very low administrative fees. Oh, and the 5% match is nice.
October 24th, 2006 at 2:34 pm
Personally, I don’t know why 401Ks are managed by companies at all. I’ve already written to my Congressperson asking for a new type of 401K that is directly managed by the employee and is just a normal brokerage account into which the company deposits the money. This would make it far easier to get good plans and would allow employees of small startups – where I’ve spent most of my career – to get decent investment options.
To give an example: in the late 1990s, the company I was at had five investment choices. They were all managed funds with 2%+ expenses. And with 4 of the 5 funds (they had a money fund), that expensive management managed to lose money in 1999! That took some serious effort
While I was there, I used the “fund to the match” strategy and put my money into the money fund. I left that company in 2000 and rolled that money into an IRA as soon as I was out the door.
October 24th, 2006 at 3:31 pm
Ooo, this subject is s sore one for me. Our company offers a 401(k) plan. But it’s handled by the big, old, Prudential Financial Corporation. I currently hold
October 24th, 2006 at 3:36 pm
Ooo, this subject is s sore one for me. Our company offers a 401(k) plan. But it’s handled by the big, old, Prudential Financial Corporation. I currently hold 5 of the 9 funds they have available. I have two other options as well, a fixed income account and company stock. The expense ratio’s range from .30 on the index fund, to 1.42 on the small growth fund. And except for the index fund, they all have a front load fee ranging from 3.75% to 5.75%. So I guess to answer your question, Not happy. :\
October 24th, 2006 at 8:09 pm
My company offers a 401(k) through Vanguard. We have about 40 funds…stock, bond, balanced, indexed and actively managed, lifecycle, the works..all from Vanguard. No individual stock or brokerage capabilities, but I don’t mind. Using those funds only, my portfolio has done just fine.
-CJ
October 24th, 2006 at 9:16 pm
My company offers a 401(k) through Schwab with probably around 15 fund choices. I don’t particularly like any of the choices and am going to suggest that they add some index funds (there currently aren’t any) I’m not really sure on the exact number because I choose not to invest in any of them. They offer the Personal Choice Retirement option which basically lets you invest in anything you could if you had a regular Schwab brokerage account, trading fees and all. It’s a pretty awesome set up (it costs $100 a year though, which isn’t bad), because you can choose anything! Individual stocks, mutual funds, etc. As an aside, I work with 401(k) plans a lot (auditing them) and most companies shoot for 12 to 14 funds, because any more and it usually ends up discouraging people. Also, most places have quarterly or yearly meetings with whoever administers the plan (Schwab in my case) and they discuss the fund options, the funds’ performance, if the funds are meeting criteria set by the plan sponsor (your company), etc. Usually, the investment company basically picks what funds are offered (they give a suggested list, and the people at your company in charge of the plan pick from that list). If you want to see a specific fund, or group of funds, find out who deals with the investment company and let them know what you think.