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Fixing 401(k) Means Fewer Funds, Better Choices
Bloomberg ^ | 27 Oct 2003 | John Wasik

Posted on 10/27/2003 8:17:38 AM PST by ladtx

Edited on 07/19/2004 2:12:10 PM PDT by Jim Robinson. [history]

Oct. 27 (Bloomberg) -- Less is more. While the famed architect Ludwig Mies van der Rohe wasn't referring to 401(k) investing, perhaps he was prescient.

Recent research indicates that more mutual funds in your retirement plan won't necessarily improve your returns. More funds mean more confusion and poorer decisions.


(Excerpt) Read more at bloomberg.com ...


TOPICS: Business/Economy; Front Page News; Miscellaneous
KEYWORDS: 401k; funds; mutualfunds; retirement
A good tutorial on your 401(k) if you are as investment challenged as I am.
1 posted on 10/27/2003 8:17:39 AM PST by ladtx
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To: ladtx
Rich Dad suggests investing instead into real estate.
2 posted on 10/27/2003 8:28:07 AM PST by Ff--150 (we have been fed with milk, not meat)
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To: ladtx
This guy sounds like a shill for the fund companies that make sweetheart deals with companies to force their employees to have a choice of the dogs of the fund companies in the 401 k plan. Many times the dogs are so bad, you can't find a listing of how the funds do on a daily, weekly, monthly or yearly basis.

My wife has had a terrible 401k re choices of weak dog, semi dead dog and dying dog. The deal was made with a top guy who was brain dead when it came to stocks.

This year they are allowing the employees to roll their 401 ks into self managed 401k's. She has just completed a roll over with Vanguard. Vanguard is a pia when it comes to setting up new accounts and playing nanny with new account owners. However, as of Friday after about 3 months of dealing with the Vanguard nannies, she is now able to buy any Vanguard mutual fund that they sell.

That is good, but our Fido 401 iras are even better. We have a choice of over 1,000 funds without a load. We can buy bonds, cds, and stock on the market. I just rolled over my FIDO 401k into my FIDO IRA to get away from the restrictions which cost me money.

Not everyone is the idiot this elitist shill has pictured the average investor as.

I predict we will see the opposite happen. More companies will be sued for these bad lockin deals so they will go to self guided 401ks for their employees.
3 posted on 10/27/2003 8:29:23 AM PST by Grampa Dave (Get a free FR coffee mug! Donate $10 monthly to Free Republic or 34 cents/day!)
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To: ladtx
Ric Edelman has a lot of good advice on how to structure a retirement plan like an IRA or 401(k). I've stuck to a basic diversification plan for my age in my IRA, the vast majority in US and emerging markets stock funds (Aggressive) and a little bit in stuff like bonds and precious metals funds (around 15% overall between the two). I'm only 25, so I have quite a bit of time to be aggressive.
4 posted on 10/27/2003 8:30:25 AM PST by sirshackleton
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To: ladtx
Translated into English, if you have a 401(k) that is in one or two stocks, or the "hot mutual fund of the year", you are probably not going to as well as you can.

Pick out a well managed stock fund, a well managed bond fund, and a well managed "short term investment fund" (commercial paper, money market stuff). You can ID a "well managed stock fund" by looking at their returns for the last three years. If the returns are positive, they know what they are doing. (IMPORTANT DISCLAIMER: Not a "bear market' or reverse index fund.)

A well managed bond fund will return 3% OVER the average return rate for a 10 year Treasury in any three year period you look at (appreciation + interest return). The Money market fund should get you somewhere between the 6 month and 1 year Treasury return consistently.

And if anyone tells you that they can get more than 8% consistently, they are selling you snake oil 95% of the time.
5 posted on 10/27/2003 8:30:37 AM PST by L,TOWM (Liberals, The Other White Meat)
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To: ladtx
What seems to consistently work is doing very little with a handful of passively managed diversified funds and leaving them alone, although few investors do this.

AHEM to that.

There are some complex reasons why the first part of this sentence is so true (and I encourage anyone who is interested in this topic to look into it).

The second part of the sentence is true for simpler reasons -- because of greed and confusion and the wrong-headed sales pitches that naive investors choose to believe.

6 posted on 10/27/2003 8:32:24 AM PST by 68skylark
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To: ladtx
We intend to get more bold this quarter and dump our "mad" money into one of ten carefully researched stocks. After choosing the ten, I'll write the companies names on ten pieces of paper, lay them on the floor and toss my cat up in the air. The company that's closest to my cat's right front paw will be the winner and then we'll short the hell out of that sucker.

If this works, I'll be writing a book titled "Catatonic - Your Cure to Stock Pickers Woes."

Then I'll rent my cat out to sire stock picking offspring. Line forms to the left.
7 posted on 10/27/2003 8:54:15 AM PST by sergeantdave (You will be judged by 12 people who were too stupid to get out of jury duty)
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To: Ff--150
Rich Dad suggests investing instead into real estate.

For insight into why you might want to tread cautiously when reading advice from Rich Dad author Robert Kiyosaki, see John T. Reed’s analysis of Robert T. Kiyosaki’s book Rich Dad, Poor Dad and John T. Reed’s views of various real-estate-investment gurus .

You may be wondering who "John T. Reed" is - I had never heard of him until last week when I stumbled across his site after reading a post in the fatwallet.com financial forum. You'll have a better idea if you take the time to read and understand the criticisms that he addresses towards financial advice givers.

Of course he himself is a financial advice giver - but he seems to be quite upfront in stating his biases and financial worldview. He is quite effective in debunking many "financial guru" claims.

I believe that he goes a bit overboard in documenting some of his allegations of various lies told by Kiyosaki, especially the discussion of Kiyosaki's military credentials (or lack thereof), but the point that he is trying to make is that evaluating a person's credibility in their statements about non-financial affairs is fair game when deciding for yourself whether or not to trust that person's financial prescriptions.

BTW, By way of disclosure, I have no relationship, financial or otherwise, with any of the guys mentioned here or in the Reed page.

8 posted on 10/27/2003 10:14:34 AM PST by The Electrician
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To: The Electrician
I believe that he goes a bit overboard in documenting some of his allegations of various lies told by Kiyosaki, especially the discussion of Kiyosaki's military credentials (or lack thereof),

LOL! Actually I was bumping this post to read later, but thanx for the info and I will read it also later.

I may be wrong but Kiyosaki writes he went to school as a Merchant Marine, then joined the Marine Corps to fly. Without going into detail, I'm not sure if that would be possible for he would have to serve in the Merchant Marine. Anyway thanx.

9 posted on 10/27/2003 10:35:53 AM PST by Ff--150 (we have been fed with milk, not meat)
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