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Which would you choose
Old 12-11-2008, 12:07 PM   #1
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Which would you choose

My 28 year old unmarried son recently lost his job in the hotel industry and was fortunate enough to find a great job with a medical supply company. He will be able to start contributing to a 401k in January and has asked for help in choosing the fund to invest with. I am hoping that those here who would care to would offer an opinion regarding his choices;

MFS Value 1.13% exp
SSgA S&P Index Fund .16% exp
American Funds Growth .68% exp
Goldman Sachs MidCap Value .76% exp
Allianz CCM MidCap .94% exp
Royce Total Return 1.08%
Baron Growth 1.31%
Dodge & Cox International .65%

Thanks!
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Old 12-11-2008, 12:10 PM   #2
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Certainly the SP fund. The rest would be up to how your son feels about risk.
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Old 12-11-2008, 12:16 PM   #3
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The S&P fund by a mile. The rest are too expensive - some are almost 10 times more expensive. If he insisted on branching out, a little (say 15-20%) in the D&C international might eventually be worthwhile.
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Old 12-11-2008, 12:20 PM   #4
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- SKIP IT - American Funds Growth .68% exp, > 5% front load . i like the fund company, but a front load is just a dinosaur practice anymore.

- TAKE A CLOSER LOOK - Dodge & Cox International .65% exp - no front load, a very good fund until recently. an excellent buy right now for some overseas diversification. things won't always be this bad. Vanguard has some notable overseas funds too, like VEURX.

- COMPARE TO OTHER LOW COST S&P 500 FUNDS - SSgA S&P Index Fund .16% exp - please compare to Vanguard S&P500, ticker VFINX, exp 0.15%

i understand he is limited to only his new company's 401(k) fund choices, but comparisons never hurt.
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Old 12-11-2008, 12:24 PM   #5
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Of these choices, I'd go about 2/3 with the index fund and maybe 1/3 in the Dodge & Cox International.

It's fine and good to compare these funds with other funds with lower expenses, but in a 401K going "off the menu" typically isn't an option, which means you either

* suck up the extra costs to be more diversified
* accept a less diversified (but lower cost) portfolio, or
* (best of all, IMO), stick with the low cost options in this 401K and look for other low-cost options for other asset classes in a Roth IRA.
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Old 12-11-2008, 12:33 PM   #6
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Quote:
Originally Posted by freebird5825 View Post
- SKIP IT - American Funds Growth .68% exp, > 5% front load . i like the fund company, but a front load is just a dinosaur practice anymore.
If the 401K plan has over $1 million in it, they buy American at NAV, so find that out first.........
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Old 12-11-2008, 02:19 PM   #7
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S&P index fund. Round out the rest of your asset allocation in an IRA or taxable account at Vanguard.
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Old 12-11-2008, 02:48 PM   #8
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S&P index fund. Round out the rest of your asset allocation in an IRA or taxable account at Vanguard.
Why do that? The S&P 500 index has a negative 3, 5, and 10 year record, and you say to invest ALL his money in that, just because its the lowest cost? Sounds like you are telling him to throw his money away..........:confused:
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Old 12-11-2008, 02:49 PM   #9
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Thanks for all your input so far. Glad to see so many pointing towards the S&P since that was where I was leaning. His HR department gave him literature indicating it as a moderate risk / moderate return fund and the D&C as high risk/ high return. I would love to hear more opinions. TIA
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Old 12-11-2008, 02:54 PM   #10
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His HR department gave him literature indicating it as a moderate risk / moderate return fund...
That's an HR department asking to be sued.

The S&P 500 index was down as much as 48% year-to-date last month. I don't think a fund that can drop 48% in a year can be reasonably categorized as "moderate risk."
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Old 12-11-2008, 03:31 PM   #11
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Or he could just pay a FA to lose him money.
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Old 12-11-2008, 03:58 PM   #12
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Why do that? The S&P 500 index has a negative 3, 5, and 10 year record, and you say to invest ALL his money in that, just because its the lowest cost? Sounds like you are telling him to throw his money away..........:confused:
I know, I know, if he just paid you, he'd soon be rich.

The guy is 28, he is not investing for a 3,5 or 10 year window.
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Old 12-11-2008, 04:06 PM   #13
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Originally Posted by FinanceDude View Post
Why do that? The S&P 500 index has a negative 3, 5, and 10 year record, and you say to invest ALL his money in that, just because its the lowest cost? Sounds like you are telling him to throw his money away..........:confused:
Duh - that is exactly why you should be buying it by the boatload! Buy low. Unless America is going out of business in his lifetime.

heh heh heh -
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Old 12-11-2008, 04:23 PM   #14
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Congrats to your son on getting a great new job so quickly--that's all.
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Old 12-11-2008, 05:24 PM   #15
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Why do that? The S&P 500 index has a negative 3, 5, and 10 year record, and you say to invest ALL his money in that, just because its the lowest cost? Sounds like you are telling him to throw his money away..........:confused:
I tend to agree with you. Sooooo, which of the funds would you then recommend?
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Old 12-12-2008, 09:06 AM   #16
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I know, I know, if he just paid you, he'd soon be rich.

The guy is 28, he is not investing for a 3,5 or 10 year window.
Easy to say when its not YOUR money....... Based on your premise, one should always buy the fund with the lowest ER, NO MATTER what the longterm return is.............interesting.......
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Old 12-12-2008, 09:08 AM   #17
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I tend to agree with you. Sooooo, which of the funds would you then recommend?
I would like to know if the 401K is big enough so he is buying the funds involved at NAV. Usually this occurs at the $1 million mark in assets in the plan. Maybe shoe can get that info for me.......
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Old 12-12-2008, 09:11 AM   #18
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S&P Index Fund
Dodge & Cox International
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Old 12-12-2008, 09:17 AM   #19
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Is there a match from the employer??
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Old 12-12-2008, 09:42 AM   #20
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Easy to say when its not YOUR money....... Based on your premise, one should always buy the fund with the lowest ER, NO MATTER what the longterm return is.............interesting.......
Actually, it is probably one of the best indicators of long term performance. Look at 10 year performance in the link, as an example.

Correlation

If you want a sparring partner for index vs manged funds, stop by the Bogleheads forum.
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