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401k Options - High Expense Ratios
Old 12-16-2016, 10:01 AM   #1
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401k Options - High Expense Ratios

I'm considering reallocation within my 401k to minimize expense fees, but there's only one option with what I would consider a low expense ratio (0.15%). The 401k is housed within T. Rowe Price, and the low price fund is the Equity Index Trust A (XAT). There are options for International, Mid-Cap, Small-Cap, Target Retirement, etc., but they're all charging ~0.6% and up.

The question is, should I put it all in the Index or just accept that to diversify this account, I'll have to deal with some higher expenses? I do have other investments, and this currently represents about 25% of my investment portfolio. If I include home equity, it's closer to 15%.

Thoughts?
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Old 12-16-2016, 10:10 AM   #2
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Since you can diversify using your other accounts I'd go ahead and put it all in that equity index. Look at your portfolio as a whole, and balance accordingly.
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Old 12-16-2016, 10:19 AM   #3
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That TRP fund is an S&P500 index fund, right?

My wife puts 100% of her 401(k) into the only index fund in her 401(k). That fund is an S&P500 index fund.

We use are other accounts to get our asset allocation the way we want it.

So for you, if you want at least 25% of your portfolio in US stocks, then I see no reason not to use the TRP XAT for 100% of your 401(k).
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Old 12-16-2016, 10:27 AM   #4
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I agree with the above couple of posts, but if the account has a self-directed brokerage account option you may be able to invest in low-cost ETF funds there. That's what I did at my last employer. I could have bought the Vanguard mutual fund but that came with a trading fee of $49 per trade, where the corresponding ETF had a trading fee of $9. I accumulated money in the 401k for a time and purchased shares of the ETF perhaps once a quarter or so.
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Old 12-16-2016, 10:42 AM   #5
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Quote:
Originally Posted by Spudd View Post
Since you can diversify using your other accounts I'd go ahead and put it all in that equity index. Look at your portfolio as a whole, and balance accordingly.
+1
I had the exact same problem with most of the 401(k) plans I participated in over the years. Limited selection of funds, mostly actively managed, with usually just one fund that had a reasonably low expense ratio. I always avoided those overpriced funds and just stuck to the low ER fund, and that would be my recommendation here.
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Old 12-16-2016, 12:07 PM   #6
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Go with the Index. I have about 40% in low fee S&P 500 index ETF's and funds.
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Old 12-16-2016, 01:13 PM   #7
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I agree with the others - go with the index fund... and make sure your *total* investment portfolio is balanced to whatever asset allocation you desire... Since they 401k is all equity - you'd want less equity in the remaining portfolio to compensate.
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Old 12-16-2016, 03:43 PM   #8
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Excellent responses and very much appreciated! I'm going to take everyone's advice and fully convert this account to the Index fund.
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