A co-worker with another company and i were discussing fees and expenses in our retirement plans & he shared with me some of his investment opportunities in his company 401k plan-
4 of his selections to choose from were Fund of Fund- or "Portfolio series-" Where the manager of the portfolio series selected different % weights in 4 different American Funds-
At a very full expense charge- along with a hefty annual report charge, and 12-b-1 fees- and also an "other" fee. It would appear that The fee this portfolio selection charged was in addition to the fees that each of the component funds would be charging- If the fund managers of the individual funds were doing their due diligence- The fund manager that simply pooled the various funds together should have a very minor job in choosing the fund weightings in the allocation . I would hope to be mistaken in this double-dipping assessment-will look into it further with him after the weekend-
However, as we did the initial assessment- of some of his offerings- we found that he is paying a full initial 5.75% commission on American Fund products- That's a pretty hefty load charge-
In researching these funds- looking at morningstar.com for their quality ratings and then Yahoo finance- and checking out the varios selections- Profile, expenses, etc-
You find a category that compares the expenses of the fund against comparable funds in the similar market segment- All of the American funds came in substantially higher in the expense category, taking at least 5 years holding period to get back close to the average cost of holding a comparable fund- That difference is likely because many of the other comparable funds are no-load. - But WHY pay such a steep load at all? There are many other options available.
What is interesting, is that he also has some limited and focused no-load Janus funds to also choose from- He was not aware of the difference between a load fund and a no-load. Also, his advisor also charges him some various fees for book keeping, records & statements, etc. HMMMM...
I loaned him a company of David Swenson's "Unconventional Success" - And since he has 30 years to go-forward and learn more on this subject- I believe he will become a well informed investor..over time.
Since i am not qualified to try to be anyone's financial advisor- I recommended he go to a fee based financial advisor and spend an hour's time and a few hundred dollars to get an authoritative review by a qualified professional that would review his present options and be making recommendations- acting as a 'fiduciary' to him- putting his interests first and foremost, and not recommending financial investments where the advisor receives compensation 'kick backs' or commissions from.
My layman's approach would be to recommend he invest through his company the maximum to get whatever company match is available- Invest that in the no-load funds 1st-as long as he can find appropriate low cost diversity-
Then fund a Roth through a Vanguard brokerage account- and -if he has additional assets available- then fund a traditional IRA in a Vanguard brokerage Account up to the allowable amount.
OK_ This site is mostly about trading- and that can run from the gamut from longer term to very short term time frames- But don't forego investing and bet it all on your trading acumen. Be Balanced in your approach-
It is just my opinion- That - like the principle of diversification -holding in a number of positions is a method to reduce Risk from the unexpected Black Swan event- or Flash Crash-
One also should not depend on one's trading account to be one's ultimate sole eventual retirement account- If one has a robust amount of trading success- (congratulations)- But do not be a one horse Cowboy- roll those excess profits into something that is less at Risk- for the very long term- and greater expense than anticipated.
How do I share this?
I became aware of my Own lack of preparation for the eventuality that at some point- kids are grown, it's me and the Spouse, and we are both getting older-
It becomes a "HOly S----" moment when you get the Social Security statement that says in a few years , you will recive 17% of your present annuaL income - AND YOU BETTER BE PREPARED TO MAKE UP THE DIFFERENCE ON YOUR OWN.! it's an OH! CRAP! moment-
For the Young Bucks out there full of testosterone and confidence- And perhaps a touch of arrogance and hubris- News Flash- Social security will not be there for you for 20% of your income needs- 20 years from now- The responsibility will be on your shoulders to have planned accordingly- because the future US of A will be fiscally more Austere-
If you are only Trading, you likely do not hold a specific longer term vision- Can't be bothered?
WHY post this "STUFF" ?!!! on a trading site like ET? Likely most here expect the future will be their's for the taking- A certain amount of positive attitude is beneficial in the trading/investing business! But also a certain amount of realism needs to be employed-
One of the trends in the financial world is the separation of the Have's from the Have-Nots- This is noted in the past 5-6 years as those that have benefitted from having assets that have advanced because of investment advances- Where those that are working for wages- actually have no investments- They have no assets allocated- because they pay 2 weeks of salary to pay for Rent. Basic Housing- OH- and you also want to eat food? There are a lot of us that fall into the category of Have-nots- and we will be increasing as the future unfolds- This is not a social-justice statement- It is just an outcome of population, economic world-wide swings , and perhaps a lack of opportunity,
or perhaps not making a good choice in one's career selection.....
It is my belief that America the bountiful had it's highlight zenith 20 years earlier-
and that the macro swing that began with NAFTA- has now achieved a rebalance of wealth that is indeed global.
What does that have to do with you and me? And our monthly checks? From the Gov't? From our investments?
As i pursued some Morningstar portfolio selections today- Their retirement portfolio at retirement age was 1.5 Million Dollars. - Yes That is a large chunk of assets to have sitting - available. Even with that large an amount of assets, The annual withdrawal seems quite small.
The Morningstar interview lasts about an hour- but-
For those of you that may be interested - It offers a different type of reality that most of us do not even consider as remotely necessary- But the reality is that this reality is what may occur - We live longer thanks to the greater medical research- And, if you are someone that tries to prepare- How do you get to the promised land of having the assets needed for a 30 year existance past retirement?
http://www.morningstar.com/cover/videocenter.aspx?id=690198
I never thought this way-
