On the flip side, my 401k with my current employer has about 3 dozen options. However, there's less diversification amongst them than with the previous employer! It lacks a REIT fund (not that I'd invest in it, since I'm heavily invested in Real estate on my own), a health care fund, and a technology fund.
Instead, some moron set it up with 4 bond funds, 2 small-cap broad market funds, 2 small-mid cap value funds, 2 small-mid cap blend funds, 4 mid-large cap equity funds, 4 mid-large cap value funds, 3 international funds, and so on.
So despite the wide selection of funds, they're less diverse than the 401k with only 12 options. Instead of choosing the fund with the least management fees, the lazy (or maybe inept?) administrator just included 3 or 4 similar funds so the participant can make his own decisions.
And despite having so many options, I only managed to make 14.05% in the current 401k for the same time period, which is basically a reflection of the broad market indices minus the management fees.
Sometimes fewer, more well-thought out options are better!
3 comments:
I definitely think fewer options can be better--especially if they're good options. I prefer to see at least some selection of index funds, especially for US stocks and bonds. A couple of target retirement date/asset allocation funds are great too.
I have 90% of my 401k in our "Aggressive Growth" fund which is a great balance of all the other funds (several of which are indexes). The other 10% is in company stock.
And I use my IRA to fill in gaps, like adding extra international funds and sector funds.
Why not roll your former company 401(K) to an IRA? That way you can completely control the investment choices.
We did that. And one year when our AGI was low due to extra write offs we converted the IRAs to Roths. We took the tax hit now instead of in the future.
i'm planning on doing that next year.
if I go back to school to get an MBA, I'll definitely be doing that.
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