401K's a sinking ship? Options Anyone?

[LMTC]

FEIRX is not a bond fund. According to the summary, the fund normally invests at least 80% of assets in equity securities issued by domestic and foreign issuers, which tend to lead to investment in large cap "value" stocks. Thus it would be down pretty much the same as most of the market. It also has a relatively high (IMO) front load of 3.5%.

 

[IH3444]

The goverment TSP funds, and the Vanguard funds have the lowest managing fees in the industry. This will result in several 10's of thousand of $$$$ more you will have over the time you are invested.

 

[Travelover]

FEIRX is not a bond fund. According to the summary, the fund normally invests at least 80% of assets in equity securities issued by domestic and foreign issuers, which tend to lead to investment in large cap "value" stocks. Thus it would be down pretty much the same as most of the market. It also has a relatively high (IMO) front load of 3.5%.

Fidelity Advisor Equity Income T (FEIRX) - Google Finance

Right this is a 99% stock fund. Sometimes the front end load is waived in 401(k) accounts, but in any case, is an unnecessary expense, plus the relatively high (1.18%) expense ratio.

 

[California]

...Since day 1, I am invested 50% Global and 50% Bond.

When the company switched to Hartford in 2005... Hartford put me into a Fidelity Bond fund as the closest equivalent to what I had with Oppenheimer.

My Hartford Fidelity "Bond Fund" is down almost 50% for the year... it makes no sense to me. Aren't Bond Funds touted as being low risk in return for modest returns?

There was no matching fund during the change over from Oppenheimer to Hartford... I ended up FEIRX
...

Haven't had a match for several years and the CEO said it isn't likly to happen in the future.

Like Wayne (LMTC) said. From the Yahoo Finance Profile for FEIRX:

[FEIRX]...normally invest at least 80% of assets in equity securities issued by domestic and foreign issuers, which tend to lead to investment in large cap "value" stocks. ... [for] the primary objective of obtaining dividend and interest income. The fund may also invest in lower-quality debt securities.

Looks like your portfolio is 50% Global Stocks and the other half mostly Large Cap Stocks which includes global. (And up to 20% of FEIRX could be in lower quality debt - which what just now crashed.) So you have the perfect storm. But that Profile says FEIRX is only down 40% for calendar 2008, about the same as all large cap stocks, so it's not quite as bad as the 50% you feared. And at least it is paying a 1.7% dividend yield, from companies that on average will still be around for years to come.

(I see Travelover just now posted while I was composing this. His info is more current than what I referenced).

What to do? If your Plan manager is charging you 3.5% fee on every cent of new investment (and on reinvestment of your account's internal earnings?) then run away. Back when the employer was putting up matching funds, that 'free' money made it worthwhile to use the employer-provided plan. But not now.

You are educated, and trained to make rational analyses. Open your own retirement account, containing a Roth IRA.

H3444 noted that Vanguard has the lowest fees in the industry. They are nearly the largest, while Fidelity is the largest. These are neck and neck competitors and I don't consider anyone else to be near them in quality. I chose Fidelity and accept slightly higher fees, (maybe a couple hundred $ per year?) because the customer service features are broader. For example you can talk to a Fidelity representative 24/7 while Vanguard was just conventional business hours, back when I chose Fidelity. Dad chose Vanguard; he wasn't going to waste a penny on fees for features he didn't need.

Then read Fidelity's investor advice, and product descriptions to learn what to put inside your Roth IRA. Ideally you could direct Fidelity to draw over the investment you have in the employer plan, to your own Fidelity retirement account.

Long term: I have a slightly different perspective than many market watchers. First, the Large Caps (as a group) will always survive whatever comes, so considering the present uncertainties, I think they are the safest bet.

However - and this I think is under appreciated - We are coming off a period of 'irrational exuberance' when everybody paid too much for their house and bought a bigger SUV than they really needed to commute to work. I conlude that nobody is going to make back what they just lost in home appreciation or recent stock prices, for a long time. Why? Because the recent stock bubble was made by everyone in the boomer generation bidding against one another to buy stocks for their retirement. I don't think we are going to have another bidding war like that again for a decade or so. So considering that overpriced houses will eventually find their 'natural' price, and autoworkers etc will eventually get back to work at likely lower wages, I forsee an economy that is a little smaller that our recent one. Sort of 'fair valued' and lacking the froth. So stock prices aren't going to go booming back up.

For the long term stocks are still the best way to share in the prosperity of the country. But I expect we will see very gradual growth for several years.

My credibility? Well, I retired at 54 based in investing in the booming 90's. I see the S&P has now come back down to what it was when I decided to retire, in 1998. I could still afford to retire today. 40% down from a more recent frothy top wasn't a disaster.

 

[ultrarunner]

Wow... what a great response!

The Hartford plan rep is meeting me Wednesday...

The CEO and Human Resource person are emphatic that there are no employee fees to participate in the plan...

The Hartford's website lists the following for FEIRX


2.03% Total Fees and Charges, including Investment Management Fee and Administration Charge.... followed by .65 Fee Received by The Hartford from Underlying Fund

Doesn't the above mean my return is reduced by 2.03% due to overhead or in other words... the fund has to earn 2.03% just to break even?

 

[Travelover]

Just to put those fees in perspective, think about this. It is generally agreed that once you retire, you can draw down your investments by 4% per year (adjusted for inflation yearly). This 4% includes everything - taxes, health care, and any fees you pay on your investments.

So on a million dollar portfolio, you have $40,000 before taxes. Now if you pay 2% fees on your investments, you have given away half of your income - $20,000. As a comparison, I have investments in Vanguard Admiral Total Stock Market shares where I pay 0.07% (not a typo).

On the other end, when you are in the accumulating phase, these fees compound against you, as has been noted by others, decreasing your end portfolio by ten of thousands of dollars.

So investing where there are low fees really is a big deal.

 

[California]

2.03% Total Fees and Charges, including Investment Management Fee and Administration Charge.... followed by .65 Fee Received by The Hartford from Underlying Fund

Doesn't the above mean my return is reduced by 2.03% due to overhead or in other words... the fund has to earn 2.03% just to break even?

I'm not sure what that means. It may mean Hartford takes 2.03% of your portfolio each year as basically a custodial fee. As to your total costs, that Google Finance page that Travelover referenced seems to say that Fidelity also takes 3.5% of whatever you choose to add to your IRA each year, and maybe even charges that rate on the reinvestment of your dividends, as their Front Load (basically, sales commission). Plus they charge 1.18% Expense Ratio every year on your account balance. (Your retirement plan might have different figures, however.)

I suggest buy a financial calculator. I've used an HP 12C for years; any Business Analyst type calculator will do. (Don't bother writing an Excel spreadsheet - this is just a rough back-of-the-envelope exercise). Run the numbers projecting compound interest out several years into the future to your retirement date, then start again using the sum available when you retire and compound that down to zero at the end of your expected lifespan. I think you will be absolutely blown away by the difference that small fee differences make when you compound them forward over several decades. Likely several hundreds of thousands of dollars.

You can't outguess the market, no one can. You would be betting against the combined wisdom of every other investor out there. But every time I get a revolutionary idea, I'm brought back to reality by the simple rule that an investment in the S&P 500 (essentially, the universe of Large Cap stocks) will put you in the 85th percentile of investment results compared to all other investors. I don't see any way to beat those odds. So the only controllable variable is to search for the lowest-fee method of owning that S&P 500.

 

[SamWalton]

Sam... what is a G fund and TSP?

The Thrift Savings Plan (TSP) is the federal employee's savings plan. The Government Securities Investments or "G" Fund is invested in very short-term U.S. Treasury securities (bonds) guaranteed by the federal government. These are unique government securities, backed by the full faith and credit of the US Government, available only through the G Fund. This is equivalent to a high-yield stable value fund, so there is no possibility of a loss of principal, and there is no risk of loss. As set forth by law, the interest paid by this fund is equal to the average rate of return on outstanding Treasury securities with four or more years to maturity. There is no ticker symbol for the G Fund.

Year G Fund
2004 +0.79%
2005 +7.10%
2006 +4.90%
2007 +4.78%
2008 +2.77%

 

[Bigbubbasdad]

I think with growth projected to be low for years, the stock market will be slow for quite awhile.

 

[Chuck52]

I see the OP works for a hospital. Depending on the management of the hospital, he may also have TIAA/CREF as an option. Their fees and other costs are about as low as can be found. They also have an exceptionally easy to use web site. Probably the hospital would have to be a not-for-profit, but my wife's hospital employer is actually a very much for-profit enterprise and TIAA bid for their business the last time the #@$%^& idiots changed plan mangers (idiots because of the frequency of change in their plans). Fortunately, Vanguard got the contract, and they weem almost as easy to deal with as TIAA.

Chuck