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Growth Fund or 500 Index
Old 04-23-2009, 01:17 PM   #1
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Growth Fund or 500 Index

I am torn on a fund choice in my 401k. I want to keep costs as low as possible so I am down to two choices. Growth Fund of America with ER=0.65% or Virtus Index Fund with ER=0.79%. Which should I choose. If it were Vanguard 500 Index I would pick that, but an index fund with ER 0.79%? Is it me or is that a bit high? Index funds win due to taxes and low costs, but if the cost is higher (with no loads and taxes are not an issue), does it still win? What would you choose?

Thanks,

Dave
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Old 04-23-2009, 01:26 PM   #2
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Growth Fund of America. It has been a consistent perfomer for many years.......
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Old 04-23-2009, 04:01 PM   #3
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My 401K equity index fund ("seeks to match the performance of the S&P 500 index") management fee is 0.05%. (That is not a misprint; managed by Barclays Global Investors.) My 401K has somewhat limited options, but all with very competitive expenses. Oh, and the equity index fund has negative returns for 1, 3, 5, and 10 year annual averages. Whoopee!

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New Situation
Old 06-03-2009, 08:23 AM   #4
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New Situation

A new situation has developed. As of 6/8 we will now have access to the Vanguard 500 index fund. Would this be a better choice then GFA given the extreme low ER%?
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Old 06-03-2009, 08:33 AM   #5
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Originally Posted by dougie790 View Post
A new situation has developed. As of 6/8 we will now have access to the Vanguard 500 index fund. Would this be a better choice then GFA given the extreme low ER%?
I would definitely choose this as my "core" large cap U.S. fund, yes. Doesn't mean you couldn't also hold other funds as a little "spice" to the portfolio, but I would stick with indexes for the core holdings.
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Old 06-03-2009, 09:29 AM   #6
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I am looking to keep things as simple as possible. I want only one fund either or. I used to be a hard core Vanguard Diehard (think DFA-ish slice and dice) but now prefer to keep things as simple as possible with one fund.
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Old 06-03-2009, 09:48 AM   #7
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I am looking to keep things as simple as possible. I want only one fund either or. I used to be a hard core Vanguard Diehard (think DFA-ish slice and dice) but now prefer to keep things as simple as possible with one fund.
That's your prerogative -- But keep in mind that in 2000-2002, when the S&P 500 dropped 50%, many portfolios which contained small caps, international stocks and bonds dropped by only 10-20%.

(The flip side, in fairness, in that in 1997-99 the S&P 500 way outperformed most other equity asset classes.)

I personally would not be comfortable having all of my equity exposure in one asset class, but if the added volatility of having only one major equity asset class doesn't bother you, then sure, stick with VFINX. If you only want to own one stock fund and you don't have a "total market index" available, I suppose this would be it.
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