[beavis] i said load huhuhu...[/beavis]

My wife has her 401k with a "financial adviser". he suggested that we put the $ into a few different "American Funds" (i think 5 different ones)

For whatever reason though he suggested the one that charges and up front fee, but then less expenses per year..... in the long run we would be ahead by the lower fees per year....... but.... then I can't really move the $ around unless i want to eat that upfront fee..... plus I am sure he loved getting the up front $.

so...my real questions.....

1 - load or no load - good and bad

2 - do most people move their 401k mutual funds diversity around at times, or do you basically leave it alone since it is 22+ years away?

3 - my 401k is mostly invested in a "lifestyle" fund which is anticipating me retiring in 20 years.... it adjusts with time.... it was very simple (doh) for me, but should I be doing something different?

 

loaded, unloaded... really up to you... but I usually prefer no load funds..

and.. I move my 401k investments whenever I feel I should.. always trying to hit the best returns.. initially I let them accumulate in some mid-cap funds for a few years, which did very well.. then started getting a bit more aggressive.. ended up this year with an 18% return... I'll take it.. but the mid-caps returned some great returns for a few years.. still have holdings in those.. I usually evaluate the fund performances every quarter to 6 mo. and get out of the lower performers and move into higher ones.. seems to work for me..

I have some american funds in another account.. they are doing well.. just depends what you are happy with.. look at the available funds to you and roll the dice..

btw.. Im just looking forward 10 years.. 2nd retirement ..

cheers

 

I'm not surprised you were told to put the investment into multiple funds, that's how "advisors" make their money.

IF you are going to invest in mutual funds you should really only be investing in one diversified fund. A fund probably has 30 positions in it, way more than enough to be fully diversified. Buying 5 nets you something which looks like the S&P 500 that's assuming there are no overlaps which is unlikely.

What you end up with is owning 150 stocks, 90% you won't understand or even know and half are going to be garbage you wouldn't want even if you knew you had them.

If you are going with mutual funds then buy one fund and accept that it's a half assed grab-bag of various stocks and accept an average return on your investment that you're going to have to pay a fee to have someone "manage".

I recommend buying 5 or 6 good stocks in non-overlapping sectors for example:

XOM, JCP, BOA, CSCO and UNH

or

PG, CVX, BA, IBM and MRK

or

TM, AIG, SWY, T and MSFT

Either one of those portfolios I pulled out of my butt will beat 90% of all funds 90% of the time and be every bit as diversified. magician can do his voodoo on them and tell you how they stack up. It's not that hard, just check them regularly to make sure they are performing well and remain the best picks. If a sector is weak pick a different one.

Just pick five of the best stocks from these sectors (google or yahoo can list the options)

Banking
Financial
Insurance
Energy
Health Care
Consumer Staples
Consumer Discretionary
Retail
Auto
Construction
Oil and Gas
Technology
Entertainment
Transportation
Pharmaceuticals
...there are others.

 

American funds are good. If you have enough with them, then you can start getting the front load waived.

I like lifestyle funds for 401(k). They really are a put it in and forget about it. I have T. Rowe Price and really like their lifestyle funds. If you don't have 100% in one lifestyle fund, for your 401(k), then you are defeating the whole purpose of these "all in one" funds.

You can chase returns and try to time the market for the next 20 years or do a nice blended portfolio of index/ETF and/or a lifestyle fund. It's your choice.

 

Ooo-eee-ooo-ahh-ahh!

Ting-tang-walla-walla-bing-bang!

 

Most people probably put their money in one fund and forget about it. Most people also haven't a clue what they're doing or what they should be doing. If you're interested in what you should be doing, it's creating a sound portfolio and reviewing it at least annually to ensure its soundness.

I like the premise of lifestyle funds, but I have yet to see one that's properly diversifed. For that matter, most mutual funds aren't particularly well-diversified.

cthree's pretty darned good at constructing well-diversified portfolios; you could do a lot worse than listening to his advice.

In any case, you should be doing some research on your own about your investments - whether they're individual stocks (or bonds or whatever) or funds. It's your future: make sure you do the best job you can with it.

 

You definitely need to do more than I just did. I literally just pulled the top names of 5 random sectors out of my ass. But just to show how simple it really is to do yourself consider:

Portfolio A: Buy 100 shares of each for $23726 on Dec 29th 2005, YTD return 21%
Portfolio B: Buy 100 shares of each for $29890 on Dec 29th 2005, YTD return 23%
Portfolio C: Buy 100 shares of each for $24715 on Dec 29th 2005, YTD return 25%

The S&P returned 14%, your mutual funds returned ??

i wouldn't buy 100 shares of each, I'd buy $5000 worth of each for a $25 investment but for the purpose of illustration.

And yes, every one of the stocks I used for the example is something worth having in your retirement account.

Compare to the top 10 large cap funds over the past year:

JHancock Large Cap Equity I JLVIX 27.89%
JHancock Large Cap Equity A TAGRX 27.18%
JHancock Large Cap Equity B TSGWX 26.25%
JHancock Large Cap Equity C JHLVX 26.25%
Janus Contrarian JSVAX 25.62%
Manning & Napier Tax Managed A EXTAX 25.08%
USAA Capital Growth USCGX 24.40%
Janus Adviser Contrarian I JCONX 23.44%
Tilson Focus N/A 23.38%
Janus Adviser Contrarian A JCNAX 23.13%

It's not the top but your return on any of those portfolios still puts you in or near the top ten which is better than the other 1970 funds beating 99.5% of them.

 

i am definately a noob on this stuff. I am now realizing that I have concentrated too much on my rental stuff and have probably missed out on a decent amount of $.

I have a sep ira of $5k in that FIREX which is up 30% this year. that is pretty much what made me realize that I have been kind of idiotic in paying extra on a 4.75% mortgage.

I appreciate all the responses!!!

 

FIREX (Fidelity International Real Estate) has done well but BEWARE it is not a diversified fund, 92% of its holdings are in the Financial sector and if the financial group gets crushed so to will your investment in it.

That's why you need sector diversification. Yes, that means that you probably won't get 32% returns in the best of times but it does mean you'll get 20% ALL of the time and you'll avoid getting -32% returns in the bad times. Your fund isn't old enough to have been through a down cycle but I've owned sector heavy funds before and have been crushed under them.

 

wow.... nice returns on those funds C-three... with all the accounting I have done for our clients this year, their mutual funds all seem to be lagging in comparison to the market, no matter how diversified they are. we only had a handful of clients come out ahead this year, and most were heavily into the energy / oil market.

How were those constructed? I tend to look at the standard deviations of returns more than the actual returns themselves. This will tell you how consistent the fund is, and whether you stand to really "lose" anything. I just look for a fund with a APY around the market average, but with a lower standard deviation on historical predicted returns. Picking ones that are at or beyond "the efficient frontier."

This is your nest-egg. You should not want to put it anywhere there is a REMOTE chance it will be lost. This should be your most conservative investment, as its the most important and the longest of your investing career.

I would agree with the advisor if you are investing a large amount of money, and the upfront fee is a minimal % of the investment amount.

You can plug in your numbers into the TVM Solver function on a Ti-83 calculator that will give you the EXACT future value of the "maintenance fees" payments and the exact future value of the upfront fee charged. If the "maintenance fees" result in a higher future value than the "upfront fees", pay the upfront fee and save in the long run. If the opposite is true....vice versa.

John

john