Brath asked in Business & FinanceInvesting · 1 decade ago

401k Investments?

I'm currently investing in a 401k & I was manually investing money into a number of asset classes. I switched to a blended fund & no longer invest money into the old accounts. Should I take the money from the accounts that I no longer put money in & add it to the blended fund that I'm currently investing?

5 Answers

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    A word about your investment choice...

    ...the tax advantages of a 401k or an IRA are a gift from the government. Don't listen to anyone who doubts them. Put as much money as you can into these tax deferred accounts, and never touch them until you are ready to retire. There is no downside to doing this.

    ...Blended is good, but be very, very aware of the fees that the fund charges. I *strongly* recommend that you invest your money in a low-fee index fund or an index ETF, which usually charges much less than 1.0% in fees. For example, I have a Fidelity S&P 500 Index fund (ticker FSMKX) that charges an amazingly low 0.1%. Unfortunately, most 401k plans do not offer such attractive funds. (More on the poor investment choices in 401ks later...)

    Be wary of "actively managed" funds, because the majority of actively managed funds do not beat the market, and charge fees of over 2%.

    Unless you are over 40, you are probably safe with just one or two index funds; e.g., S&P 500 (large cap) and Russell 2000 (small cap). Total market ETFs are a nice choice too. If you want to be extremely diversified, you can invest into an International ETF. I have a BRIC (Brazil, Russia, India, China) ETF. The ETF charges very low fees. No need to get fancy with sector funds. If you want to keep it simple, just invest in a single S&P 500 Index fund from a reputable fund company like Vanguard or Fidelity.

    Stay away from sector funds, because they usually charge high fees, and suffer much more volatility than an index fund.

    Stay away from Insurance Annuities. Like 401k plans, they usually have poor investment choices and charge high fees. Bad choices, usually made by uninformed investors.

    Stick to the IRAs, and stick to the index funds.

    A word about consolidating your accounts...

    ...A common mistake is to think that having multiple accounts (and multiple funds) gives diversification to your portfolio... it couldn't be more misleading, because very different "looking" funds might overlap each other and hold the same underlying securities. You can't trust the name or the profile.

    If you invest in more than one mutual fund, then the only way to ensure you are diversified across different accounts is to you a tool like Morningstar's Instant X-ray . This requires a lot of work. A simpler way is to move all of your money into one account, which is what you are considering, and choose a single fund.

    If you have many old 401ks (from former employers), then I recommend that you execute a "direct rollover" all your old 401ks into a single IRA so you can get access to better investment choices. 401ks are notorious for having limited and expensive (high fee) fund choices. Make sure you do a "direct rollover" so you don't pay a tax penalty.

    With your current 401k, you are stuck with whatever investments choices provided by your employers plan.

    I maintain one IRA and a 401k from my current employer. Every time I switch jobs, I immediately execute a direct rollover into my IRA.

    If you have less than $100,000, then you are probably better off selecting either a discount broker, or a fund company (like Vanguard or Fidelity) as the custodian. Full-service brokerages like Merrill Lynch or Morgan Stanley charge all sorts of fees to investors that have less than $100,000. If you have more than $250,000, then you could go for a full-service brokerage and avoid many fees.

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  • Anonymous
    1 decade ago

    One of the most common retirement plans is the 401 K. In a 401 K, some amount is deducted monthly from your pay check. The money is tax deferred and so you do not pay taxes on the amount invested. Usually there are various investment choices like mutual funds, stocks, bonds etc. In some cases, the employer will match the employee’s contribution to the account, though these instances are decreasing.

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  • 3 years ago

    At your age, riskier funds are suited -- you have time on your facet. yet ... take a glance on the extensive-unfold of your cash. Are they a minimum of Morningstar 3-famous guy or woman funds (utilizing 5-3 hundred and sixty 5 days score)? Are their administration costs clever? (a million.5% must be easily the acceptable.) additionally, you should no longer be paying any commissions to purchase them. administration costs are corrosive. no longer a situation in the time of sturdy years, yet they are going to turn undesirable years into failures by way of the years. i've got had sveral 401ks by way of the years. i all started a clean pastime final 3 hundred and sixty 5 days, for this reason a clean 401k trustee, and the money interior the recent plan are undesirable -- almost each and every fund has administration costs in the two-3% variety, and almost each and every fund is mediocre. So at this agency, each and every thing is going into an SP500 index fund which isn't sexy yet additionally the only ingredient they are in a position to't screw up (and occurs to be the only fund with a sub-a million% administration fee). (only BTW, as quickly as I leave an agency, I definitely have alwyas rolled my 401k to a chit brokerage like constancy or Schwab -- greater useful funds, decrease costs, etc. this is a mistake to roll 401k funds right into a clean agency's plan, in spite of the incontrovertible fact that there are circumstances the place protecting an previous agency's plan is a sturdy selection.) the final ingredient is to look at asset allocation. you do no longer choose funds that are overly concentrated on one industry -- gold funds do properly some years, and horribly different years. you decide on massive-image funds that concentration on growth or fee. the only exception i could make right that's that some sector funds look sturdy for long-term growth, like electronics or biotech, yet even then i could be careful -- only ask anybody who's been in wellbeing care funds over the final decade.

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  • Anonymous
    1 decade ago

    I believe you can roll one account into another without paying taxes or penalties. Your new fund can help you. Your CPA can tell you for sure. BUT...

    There is question about taking the money out starting at about age 60. A CPA told me he ran the numbers and all the tax free money you have put into your pension is returned to the gov't within 3-4 years. After that your money is taxed until it is all out at age 70 at current tax levels.

    It could be advantageous to look into an insurance annuity. It is also accumulating mostly tax free, you can borrow from it as you need it, it lasts as long as you live and you can pass it on to your heirs. And you do not have to take out 10% /yr if you chose not to. lol

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  • 1 decade ago

    Without knowing your portfolio, it's hard to give good advice about where you put your money.

    It is better (IMHO) to not have all of your money in one investment.

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