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401K Holdings
Old 07-06-2008, 05:45 PM   #1
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401K Holdings

Hello,

My company provides a 401K plan through Merrill Lynch. I contribute 12% to my 401K, which is double the requirement to get the company match. They do .50 on the $1 up to the first 6% of your paycheck. For those wondering, yes, I've also already made the full 2008 contribution to my Roth IRA. I have many options available in the 401K but nothing that looks like the VTSMX that I've seen recommended here a few times. Is it better to put everything into the S&P 500 equivalent and save on the expenses across multiple funds, or keep the many fund selections that I am currently in. I only had a couple funds up until earlier this year, and sometime in the early spring I let the Merrill Lynch automated adviser rebalance me. Is there a Merrill Lynch VTSMX equivalent that I should be asking my company why it's not an available selection? If anyone is curious here are my current holdings. The current allocation percentage of my portfolio and contribution rate into the funds are roughly the same. Thank you in advance for any opinions that you have.

-Raymond
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Old 07-06-2008, 07:55 PM   #2
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I'm not sure there's enough here to go on. To give you useful advice, it would be helpful to have some idea of the funds you have available, the costs (expense ratio) you would be charged for each fund, and how much (%) this 401K represents of your total retirement saving, as well as how much (%) you have in any other 401ks or IRAs.

Points:
- Even if the choices in your present 401K aren't great (high ERs, inability to meet your allocation goals), you may be able to make up some of the shortfall using your IRA(s)
- VTMSX is a good, low-cost fund that will get you exposure to a large portion of the US stock market. It can be a "core" holding, but it is unlikely that it will be a single solution, especially if you want/need exposure to bonds, foreign stocks, real estate, commodities, etc.
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Old 07-06-2008, 10:37 PM   #3
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Also, to add to samclem's list, are you getting these funds "load-waived". Several of the funds on your list would have front-end sales charges if you went into a broker's office to buy them.
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Old 07-07-2008, 03:21 PM   #4
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The S&P500 fund equivalent is 0.37%, the rest are all in the 1-1.5% fee range.

My 401K is 80% of my retirement savings, roughly 65K.

The Roth IRA is the other 20%, roughly 15K.

I also have some individual stock picks that together are down to about 8K.

I'm far from retiring, but considering that I am 31 and only have 4 years left on my house and no other debt I expect to be able to flood the regular trading account with new money when I no longer have a mortgage payment (currently $800 every other Monday)

So, having the 1-1.5% fees, am I best consolidating everything into the low fee S&P500 equivalent, or leave the money spread out since different things will do better in different years?

-Raymond
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Old 07-14-2008, 08:14 PM   #5
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I am a big Vanguard/Bogle fan and to paraphrase, costs matter.

Saving 1% costs is a given. Everything else is speculation. Once you have what you feel is enough diversification among asset classes, everything else should be in low cost options.
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Old 07-14-2008, 08:25 PM   #6
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The S&P500 fund equivalent is 0.37%, the rest are all in the 1-1.5% fee range.
Then I'd put 100% of my 401k contributions into the s&p500 fund and balance out my holdings with far cheaper offerings elsewhere.

For example, you could hold the s&p500 in your 401k, make roth ira contributions to a separate account in bonds, hold a taxable account with foreign equities, etc.

Funds sucking a percent or more from your bottom line stink. Especially when they're going to do it every year from now until you withdraw your last dollar from them a long time from now.
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Old 07-14-2008, 08:40 PM   #7
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Then I'd put 100% of my 401k contributions into the s&p500 fund and balance out my holdings with far cheaper offerings elsewhere.
I made the change and converted my 401K to the S&P500 around the time of my post on 7/7.

That 1% makes a huge difference over time after checking some interest calculators between 8% and 9% returns over 30 years.

-Raymond
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Old 07-14-2008, 09:14 PM   #8
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Ding ding ding!!!

We had the same thing with my wifes 403b. All the funds had horrifying expenses except the s&p500 fund, so we went 100% into that and I offset the weighting elsewhere.

Worked for me.
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Old 07-14-2008, 10:30 PM   #9
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Ding ding ding!!!

We had the same thing with my wifes 403b. All the funds had horrifying expenses except the s&p500 fund, so we went 100% into that and I offset the weighting elsewhere.

Worked for me.
Hey, be sure your marriage is sound before you try this. Else before you know it she's gone with her S&P 500 index IRA and you've got the "diversifying" Enron futures and Russian REITS.
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Old 07-15-2008, 09:59 AM   #10
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Eh, I do all the asset allocation stuff and she doesnt even know her username and password for her ira.

Any funny business and I'd plow everything into fannie and freddie.
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Old 08-04-2008, 03:39 PM   #11
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fannie and freddie are both trying for government assistance so why invest in them?
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