Another 401k question: Fee's vs risk

I'm in the process of re-evaluating how I'm doing my 401k contributions here at work (as well as upping the amount).

At 32, living within my means, and knowing retirement isn't realistically in the cards until I'm at least 60, I'm basically VERY RISK TOLERANT. IE, for the last few years, 75% of my 401k contributions have been in the more aggressive choices available, and the other 25% in a conservative fund.

As usual, our entire company match goes into their stock, so with roughly 55% of current account being made up of company stock.....the plan is to transfer most of it (realizing the 25% of so gain over the past year) and drop it into more aggressive options.

Sorry, rambling a bit, I'd basically like to transfer all my current assets into the MOST aggressive assets offered, relatively equally....but I was curious if there is a good barometer to follow of past performance vs fees, that could negatively hinder future growth?

There was a "Frontline" episode on PBS that covered this very subject- you may want to check on that.

The end result that historically, the non-managed index funds performed better in terms of actual money than the managed funds. The managed funds had a tough time consistenly matching especially when one factored in fees.

You may want to try finding that episode of Frontline.

Ran across this myself a little while back. From personal experience, managing my own has definitely netted me better returns than when someone else was doing it.

Bump for new day

When you guys say "managed" vs "un-managed" what do you mean? I assume managed means that the company who control your retirement is giving you a few option like aggressive or stable, and they handle the investments based on those requirements. They charge you a fee based on this management?

Un-managed, how does that work? They hold your money, but you get to mess with it as you see fit? So if you want to put all your retirement stock in Google, you can?

I assume full market risk. I've been 100% stock since bond yields fell in a hole a couple of years ago. There just isn't enough potential upside to them now. I did well holding about 30% bonds before that and converting them to stock at pretty near the bottom. I don't pay people to manage my money. I'm mostly in index funds with a very few individual stocks. The risk of the market as a whole is enough without adding on the risk of someone else's "good ideas" and the fees they entail.

Currently, I'm only talking about my Employer provided 401k (Wells Fargo). So there are a variety of funds to put my money in, I'm not interested in going out and trying to pick individual stocks or anything.

I'm curious if the higher fees, and more up/down nature, of the most aggressive funds, is worth it over say a Vanguard 2045 Target Retirement fund that's been consistently providing 7-8% since inception. Or take the higher fees of something like Hartford Small Company HLS which has had Quarters of 1.5% to 45% of growth.

PHeller wrote: When you guys say "managed" vs "un-managed" what do you mean? I assume managed means that the company who control your retirement is giving you a few option like aggressive or stable, and they handle the investments based on those requirements. They charge you a fee based on this management? Un-managed, how does that work? They hold your money, but you get to mess with it as you see fit? So if you want to put all your retirement stock in Google, you can?

Index funds vs. Actively Managed funds. An index fund basically will go up and go down with the market. More or less a set it and forget it. Actively Managed funds try to beat the market; a fund manager is doing the work though--not you. Rarely does it happen.

Index does not mean that you don't have a choice between agressive or safe. For instance, with one company (i.e. Vanguard or Fidelity), I can be in an S&P index fund, or an international index fund.

PHeller wrote: When you guys say "managed" vs "un-managed" what do you mean? I assume managed means that the company who control your retirement is giving you a few option like aggressive or stable, and they handle the investments based on those requirements. They charge you a fee based on this management? Un-managed, how does that work? They hold your money, but you get to mess with it as you see fit? So if you want to put all your retirement stock in Google, you can?

They are talking about funds that are actively managed by a manager vs something like vanguard which just picks funds that are representative of an entire market or certain subsegments of a market. The stat is something ridiculous like only 5% of actively managed funds actually beat the market. If it costs more, and you usually don't get higher than average returns, why bother? My money is in Vanguard VFFVX and VTSAX.

A quick Google search shows that its actually more like 10%-20% may beat the market in a given year, but after expenses the managed funds that actually beat an index fund are few and far between.

Enyar wrote: A quick Google search shows that its actually more like 10%-20% may beat the market in a given year, but after expenses the managed funds that actually beat an index fund are few and far between.

If the frontline show was a thesis, this would be the executive summary.

The show was partly data that illustated that, especially the typical fund + fees. Another part was them asking fund managers why- the only one answering the questions was John Bogle, founder of Vanguard in 1974.

It was pretty interesting.

I thought it said "Fee vs Frisk".

Go ahead. Frisk me. I ant doin nuttil E-LEGAL!

alfadriver wrote:

Enyar wrote: A quick Google search shows that its actually more like 10%-20% may beat the market in a given year, but after expenses the managed funds that actually beat an index fund are few and far between.

If the frontline show was a thesis, this would be the executive summary. The show was partly data that illustated that, especially the typical fund + fees. Another part was them asking fund managers why- the only one answering the questions was John Bogle, founder of Vanguard in 1974. It was pretty interesting.

The Retirement Gamble? Or Can you AFford to Retire?

http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

In reply to z31maniac:

Good question- just skimmed it on Frontline's web page- looks like it's "The Retirement Gamble".

I missed the beginning, so didn't get the name of it.

Theoretically, it would save a lot of time and research as well as money (in terms of what to invest in).

My money is in Vanguard VWIAX, I picked it because it has the most consistent return over its history and the big drop of 2007-2008 affected it less than others. It has a .018% expense ratio, lowest in the industry. So far the return has been good, maybe not huge gamble good but it's been solid and steady. I should double my money over ten years.

https://personal.vanguard.com/us/funds/snapshot?FundId=0527&FundIntExt=INT

By the way, you can start one in a different VWIAX fund with a much lower initial investment. This one requires only $3,000 but it does have a higher expense ratio of .25%.

https://personal.vanguard.com/us/funds/snapshot?FundId=0027&FundIntExt=INT