I have a typical 401k which I have all invested in their "conservative model portfolio". How do I go about moving it all to low fee index funds? Do I have to sell everything? Would that further incur huge fees and penalty? Am I just better keeping what I have where it is and investing all new money in index funds?
Do you have any available in the 401(k)? If not, the question is moot.
You'd simply call/log in to the plan's website and do the exchange from your existing fund(s) to the fund(s) you want to be in.
It shouldn't. Is there a reason why you think it might?
-- Rich Carreiro snipped-for-privacy@rlcarr.com
Most funds included in 401k accounts are either index funds, or "closet index funds", which means funds that do not declare themselves to be index funds, but in fact trying to replicate performance of index funds. Those usually charge more in fees but do not offer any advantage.
You need to check your plan's website and see what funds they offer. Some 401k plans do offer an index option, and some do not. (they make less money from index funds than from non-index funds).
You are better off investing in funds with lower fees, compared to similarly allocated funds that ask for higher fees.
i
There's no simple answer for 401(k)s, because there are a wide variety of different plans. You have to contact your plan adminstrator or read the plan documents if you them available. The actual funds available and the fees and rules should be specified.
Generally there are no specific transaction fees in most plans. My plan has "frequent trading" restrictions, where if you sell a fund too soon after you bought it (except for contributions or rollovers) you'll get hit with a penalty.
Brian
On Aug 5, 4:28 pm, Igor Chudov wrote
Here are the funds available, do you know if any off-hand are better than my investing in the Model portfolio?
Model Portfolio - Conservative Model Portfolio - Moderately Conservative Model Portfolio - Moderately Aggressive Model Portfolio - Aggressive Stable Principal Stable Principal Fund Bond Bond Fund Russell 3000 Index U.S. Equity Broad Index Fund Large US Equity Large Cap Blend Equity Fund Large Cap Value Equity Fund Large Cap Growth Equity Fund Mid US Equity Mid Cap Equity Fund Small US Equity Small Cap Equity Fund International International Equity Fund
My understanding was funds always have fees and arcane tax consequences when you buy/sell. I take it I can ignore all tax consequences since I am not withdrawing any money? But what about fees, are there usually some fees to transfer to different funds?
Put part of your money into "U.S. Equity Broad Index Fund", and part of your money into "Bond Fund" or even stable value fund.
How much to put in which fund depends on how much you tolerate swings in stock prices and how far you are from retirement.
Also keep in mind that owning bonds is also risky and is subject to loss of principal and effects of inflation.
There is a theory that is widely touted among financial advisors, that boils down to suggesting that future returns from owning stocks do not depend on how expensive they are now. I find this theory to be wrong and harmful.
Aside from this, as of now, stocks are priced sufficiently attractively so as to make investing some part of your money in them worthwhile.
i1) Are those the actual names of the funds, or are they the names of the category/benchmarks of the funds? 2) Can't answer whether any are better/words than the models without knowing the details of the models. I imagine the models are some fixed percentages of the other funds -- are they?
-- Rich Carreiro snipped-for-privacy@rlcarr.com
Correct. There are no tax effects to transactions wholly within the 401(k). They don't even get reported.
I'm not saying there cannot be, but in all the various 401(k) plans I've ever been in, there never was (aside from anti-short-term trading redemption fees the underlying funds may have had).
-- Rich Carreiro snipped-for-privacy@rlcarr.com
Most likely "Large Cap Blend Equity Fund" will be their S&P500 index fund, and the "International Equity Fund" will be the EAFE index fund.
You should be able to check on this by looking at their performance relative to those indexes. There should be very little difference (on the order of a few tenths of percent) for all timescales if they are indeed index funds.
The next thing to look for is the expense ratios. Ideally, they should be < 0.1% for both of those.
Anoop
If you are conservative, would also suggest checking out Zvi Bodie's work.
Anoop
Possibly. They also might be actively managed. The Broad Index Fund also could be S&P 500, or it might be a total stock market fund. That would another one to look into.
My company have information sheets for all the funds (non-tickered as well) so it would be a good idea for Mr. N. see if something like that is available for his.
Ideally. In practice, even index funds in 401(k)s can be higher because plan fees are added to the ER to cover accounting and such.
Brian
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