Fees of the 401k

Feb 8, 2007

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  1. James
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    James Guru

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    Much talk about recently on how great defined qualified plans are. Well report after report shows holes, major holes yet who is listening? Yet another study!

    http://www.401khelpcenter.com/tracking/mdh_understanding_fees_v2.html

     
  2. Sam
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    Sam Founder Administrator

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    Wow, that is an excellent article and a real eye opener. Thanks, James.
     
  3. realistagent
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    Fees

    Wow, quite an exstensive read, but well worth the time.
     
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  5. Crabcake Johnny
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    Crabcake Johnny Guru

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    I certainly hope we're not looking for the perfect investment. That would be a high return with low risk and low fees.

    I think there's too much focus on bashing investment vehicles and not enough focus on just investing in the first place. While everyone can sit here and argue about mutal funds, annuities, tocks, 401ks the reality is that none of it matters since Americans simply aren't saving crap.

    Who's ahead:

    Bob: Invests $10,000 and loses half.

    Tim: Invests nothing - just blows all his money.

    I'll take Bob's $5,000 at the end of that year instead of Tim's zero.

    I'm not touting losing money on investments but to be quite frank, I really don't care all that much what my returns are - just that I HAVE returns. I'll gladly put in $400 a month into the market instead of grabbing a new car payment. Shit - so I put in $400 a month and am down 10% at the end of the year. I grab that new car and at the end of the year I not have zero invested, but am negative since I'm paying interest on a car loan.

    Look at the what the average person hears:

    I invest in my 401k - "That's stupid - fees are killing your return"
    I invest in mutual funds - "That's stupid - bad average returns and fees."
    I invest in the market - "That's stupid - way to much risk. Money may not be there when you need it."
    I invest in CDs "Thta's stupid - very low returns don't keep pace with inflation."

    Instead of calling everyone stupid let's just get people to do SOMETHING with their money instead of this "grass is always greener" crap.

    You know how I pick my stock? We choose companies where we use and like their products. I could give a rat's ass about the P&E or where the market is.
     
  6. James
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    James Guru

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    No but the study brings out the obvious normality of the structure. Lets face it, a qualified plan is from the government via the employer via the Fund. Now people should be skeptical about this, none of the identities have anyones best interest at heart except their's. I am a strong believer that the individual should take care of this themselves and look out for their best interest and not rely on ones employer or mulitple third parties that obviously have their interest to be concern about.

    What the government should do if they have the individual best interest at heart is to cancel the Qualified Plans and come up with a Tax Structure the puts the incentive to save instead of spend. In other words tax spending not income. Now IMHO that would benefit many not some.
     
  7. Crabcake Johnny
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    Crabcake Johnny Guru

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    And this is why everyone should invest in stock. Because the primary responsiblility of any public company is to the shareholders. When you're a shareholder the companies are working for you every day. When you have most of your money in vehicles where the companies make money off fees, then they're working against you. I have some mutual funds just to spread the risk, but most of my money is in index funds - extremely low fees. Most of my portfolio is pure stock. Zero fees unless you trade and every day the CEO wakes up and his primary goal is to make me money!
     
  8. James
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    James Guru

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    Geepers, yet another myth we need to dispell? Today's corporation, lets take GM, Walmart, anyone will do, they are in business to serve very few shareholders, ie the ones that have enough votes or enough shares to force Boards and CEO's to take notice. The small shareholder is basically a non factor when tough decisions have to be made. Basically why today, most decisions are done for the short term versus the long term financial health of the company. I know of very few FP'ers worth their salt advises the old rule "Hold Long", lets face it we can look at companies like GM or Walmart and their decisions they make today seems so stupid!

    No one can explain to me and some have tried, to suggest Walmart's expansion since the death of the Old Man makes good sense for the company, this is something the old man himself suggested against. I can see where some benefit from it but looking at the long range view as a small investor, it simply doesn't make sense! In fact volumnes have been written about todays changes of the Corporate View and how it has change over a short duration.

    Now don't get me wrong, investing in a good company is a good idea but understand, they will do what is best for very few and as a small investor you are along for the ride and count for nothing. So I suggest looking no further than 3-5 years max on holding any one company without seriously rethinking why you invested in that company and it really doesn't matter on their performance. In other words, buying stocks like Kodak and holding it for years is something that simply shouldn't be done like it once was, the old Blue Chip methology simply doesn't work like it once did.
     
  9. Crabcake Johnny
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    Crabcake Johnny Guru

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    Yet if you put a one-time investment of $10,000 into Walmart stock 10 years ago and cashed it out today you'd have $39,000 with reinvesting the dividends. That's a gain of 172%

    http://www.sharebuilder.com/sharebuilder/Research/Tools/WhatIfIdInvested.aspx

    Just plug "WMT" into the stock symbol and have fun. I'm not sure what you're touting that gives your clients a 172% return over 10 years.

    If you just put in $1,000 initially yet put in $400 per month every month 10 years ago you'd have over $70,000 today with a 37% return.
     
  10. Steve
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    Steve Super Genius

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    James -- My thought would be that if I owned 10 shares or 1,000,000 shares, my goal would be the same. I want my ultimate share value to rise.

    Please explain to me your thoughts on why the major shareholders would have a different agenda than the smaller ones. The big shareholders are typically in for the long haul -- their goals should mirror my own.
     
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