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Old 04-12-2014, 08:12 PM
 
Location: Central Massachusetts
4,800 posts, read 4,850,322 times
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High fees eroding many 401(k) retirement accounts

Saw this on MSN and thought many people could use some of the information to evaluate their portfolios. In my 401k the fees are very low and are under 1% per year. Fees on an index fund should be low. On a managed account that doesn't follow one of the indices should do much better if it is managed properly and that would be a reason to pay a higher fee.
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Old 04-13-2014, 08:47 AM
 
2,601 posts, read 5,294,624 times
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There was a similar discussion a little while ago, as I recall started after a PBS documentary.

> On a managed account that doesn't follow one of the indices should do much better if it is managed properly and that would be a reason to pay a higher fee.

THIS is the real question...do you believe this or not? The average of all mutual funds is very likely to follow the market, less management fees. Do you believe you have picked the manager who is going to have a run of good luck? Or the manager who is smarter than all the other managers? This is the bet you make when you pick a managed fund.
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Old 04-13-2014, 10:19 AM
 
Location: WA
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I did some research for a small business wanting to offer a no-match 401K and found it can be costly for the employer so I guess these expenses get passed on. I always worked for major corporations where there were no fees to participants but in the case of the business I was doing research for they decided to drop the plan for a retirement program not wanting to absorb the costs and not wanting to offer a one with fees.
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Old 04-13-2014, 10:49 AM
 
48,516 posts, read 83,955,483 times
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I agree; nothing is free I the end .Look at other fees to cover on simple things like benefits in buying a car or sales cost to hire a realitor. Last I heard GM added 1500 per vehicle.
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Old 04-13-2014, 11:08 AM
 
29,782 posts, read 34,876,173 times
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Quote:
Originally Posted by rational1 View Post
There was a similar discussion a little while ago, as I recall started after a PBS documentary.

> On a managed account that doesn't follow one of the indices should do much better if it is managed properly and that would be a reason to pay a higher fee.

THIS is the real question...do you believe this or not? The average of all mutual funds is very likely to follow the market, less management fees. Do you believe you have picked the manager who is going to have a run of good luck? Or the manager who is smarter than all the other managers? This is the bet you make when you pick a managed fund.
I watch CNBC a lot and it is hilarious how many times I hear it is a sock pickers market and that the days of just investing in a set index is over if you want to make money (translated so they can make money). Many Hedge funds lost money last year while the market soared many still are. A number of them are seeing significant flows out. Some are very successful but it is a steep price to pay when they aren't. Mutual funds are a mixed bag and most trail index funds. What's bad is some companies are now offering index funds with high fees for those who just hear the words index and jump in.
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Old 04-14-2014, 06:00 PM
 
12,825 posts, read 20,148,018 times
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Obviously the ROI of a 401K has to consider employer match (or lack thereof). A good match would make certain mutual funds more palatable since the employer match could theoretically cover the down side risk of failing to beat the index coupled with fees.
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Old 04-16-2014, 05:10 AM
 
159 posts, read 105,483 times
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Quote:
Originally Posted by golfingduo View Post
High fees eroding many 401(k) retirement accounts

Saw this on MSN and thought many people could use some of the information to evaluate their portfolios. In my 401k the fees are very low and are under 1% per year. Fees on an index fund should be low. On a managed account that doesn't follow one of the indices should do much better if it is managed properly and that would be a reason to pay a higher fee.
I wrote a similar article last year. The problem with the subject is that the fees are wildly different because they vary from employer to employer. It isn't just a management fee. There are fees on fees. At 2%, the fees basically offset the employer match.

It's Not Too Early For Millennials to Save For Retirement - PolicyMic
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Old 04-16-2014, 05:35 AM
 
Location: Central Massachusetts
4,800 posts, read 4,850,322 times
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Quote:
Originally Posted by JoeTheEconomist View Post
I wrote a similar article last year. The problem with the subject is that the fees are wildly different because they vary from employer to employer. It isn't just a management fee. There are fees on fees. At 2%, the fees basically offset the employer match.

It's Not Too Early For Millennials to Save For Retirement - PolicyMic


Thanks that is a great piece there. I hope that people here coming up "Millennials" can do some changes to help in making a good future life for themselves. This subject of saving and retirement will go on for a long time. Most people will never retire in the strict sense of the word. A good majority will work until they no longer can. But articles like this can help those of us that at least attempt to make a retirement work.
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Old 04-17-2014, 03:23 AM
 
71,651 posts, read 71,777,271 times
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Quote:
Originally Posted by rational1 View Post
There was a similar discussion a little while ago, as I recall started after a PBS documentary.

> On a managed account that doesn't follow one of the indices should do much better if it is managed properly and that would be a reason to pay a higher fee.

THIS is the real question...do you believe this or not? The average of all mutual funds is very likely to follow the market, less management fees. Do you believe you have picked the manager who is going to have a run of good luck? Or the manager who is smarter than all the other managers? This is the bet you make when you pick a managed fund.

why would someone use managed funds instead of just striving to be average?

the answer is because you want to exploit that funds weighting or strategy at times and not marry the fund forever.

why is it when it comes to investing your money being average is okay to strive for .

does anyone want to see the average doctor or just an average lawyer?

the point is just being average is a poor choice to strive for.

you as the investor can do an awful lot to get better than average returns. while many fund managers are stuck by plan bylaws investing in only certain ways you are free to do anything and quite frankly not being average and getting better returns is easier than you think.

you exploit managers and their styles and use them when the big picture calls for that syle , you don't stick with the same fund when the big picture says differently.

when the dollar was weak fidelity export and multinational was the place to be. it was not the place to be when the dollar gained strength. you as the investor are free to switch ,the manager is not.

with biotech up 80% last year i would have moved on from a fund where the magager was still heavy in biotech.

an index like the s&p 500 can be very easy to beat. it is a poor index to be in as the more over valued a stock becomes the more of your money and weight in the index it takes.

the more a stock goes up the more money it grabs , the less a stock went up or the more undervalued the less money it gets. sounds the opposite of what it should be right?

it is market capitilization used at its worst.

want to know something ?

if you bought the companies in the fortune 500 instead which are rated by different criteria and not by over valued market capitalization you would easily have beaten the s&p 500 by 2 points almost every year.

that is an amazing difference, most fund managers would sell their kids to do that but by their funds bylaws they may not be able to buy stocks outside the focus area of the fund.

the point is managed funds can be great tools for getting alpha but you need to use them in a manner other then just riding them up and riding them down . very few by design are all weather funds you stick with forever.

you use them when their time is right and move on when it is not. you don't need a crystal ball to see the big picture changing.

i easily beat the s&p 500 over 26 years now with simple fund exchanges as the big picture changes. just like steering a big ship you nudge it back on course.

for the small investor who pays attention and has some basic knowledge striving to just be average is not a goal they should strive for . it is to easy to get superior returns when you are free to move anywhere unlike most fund managers.

the whole idea is to exploit those managed funds when their time is right and then move on.

even the best of funds like fidelity low priced stock fund or fidelity contra or growth co have seen their days come and go at times . low priced stock fund was a holding of mine for decades and the manager is one of the all time greats but when it was time to go elsewhere that fund was exchanged for a more suitable one for the times.

if you are not going to take the effort to do this then being average is right for you , you belong in index funds where you can never be better than average but will never be worse either.

being average is certainly easier than being above average so there is something to be said for just being average, it takes little effort with indexing . that isn't a bad thing.


there is a place for both types of funds depending on who you are. i have never been one to strive for average in anything i do..

Last edited by mathjak107; 04-17-2014 at 04:15 AM..
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Old 04-17-2014, 06:11 AM
 
2,601 posts, read 5,294,624 times
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> the point is just being average is a poor choice to strive for.

Depends on whether you believe a fund is above average because it's smart of above average because it's lucky.

AND whether you are good at picking funds because you're smart or because you are lucky.

(Barring inside information, which is illegal) Everyone has access to the same information.

Personally I'm persuaded by the low-overhead index fund argument. But suit yourself.
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